Rates

How are mortgage rates determined?

Mortgage loans are sold in the bond market as mortgage backed securities (MBS). Since these are considered bonds, interest rates are affected by the bond market. The benchmark bond to monitor as an indicator of what direction interest rates are going is the ten year Treasury bond. Generally speaking, if the ten year Treasury bond yield goes up or down, so will mortgage interest rates.

Helpful pointers when shopping for a mortgage:

• There are several factors that determine what interest rate you qualify for. For example, your loan program, credit score and down payment amount all play a role in determining your interest rate.
• Some lenders have higher closing costs and slightly lower interest rates. You should consider higher closing costs in the same context as buying down the interest rate. In other words, in conjunction with comparing interest rates, you also should compare closing costs because they are related to each other.
• Unfortunately, some lenders quote artificially low interest rates once they learn that you are not locking in that rate immediately. You should request an interest rate quote as if you are locking in that day. Interest rates can change frequently, even several times throughout the day.
• Never give your social security number to any lender unless you are absolutely sure you will be utilizing their services. Each time your credit report is obtained by a lender, your credit score can drop.
• Be wary of lenders who charge non-refundable application fees. This can usually be a sign that they lack confidence in their ability to deliver the terms they have quoted you.