Most Searched Home Loan Programs July 2008:
30 Year Fixed Home Loan - California Refinance
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30 Year Fixed Home Loan - Texas Refinance
According to Informa Research Service’s Interest Rate Review®, the national average APR on a 30 year fixed mortgage rose 74 basis points over the past 6 months (from 6.00% to 6.74%). Because we are in a rising rate environment, how can you ensure you get the best rate on your mortgage home loan? Lock your rate.
When beginning your loan application process, you have the option to either lock or float your rate. By locking your rate, you are opting to commit to the rate and points option available at the time of the lock. Locking in your rate is one way to ensure the rate on your mortgage is not higher than expected upon loan closing. This option can help offset the volatility of an uncertain market.
The other option is to float your rate. Floating your rate means that you choose to lock-in your interest rate at some time after application, but before settlement. The borrower becomes more vulnerable to market volatility and fluctuations in rates. The advantage would come if you wait to lock-in and rates decrease, you may get a more favorable rate.
In a rising rate environment, locking in your desired rate early guarantees that your rate does not rise during your loan application process.
You should also consider the rate environment when you are choosing a type of mortgage product to finance your home purchase. Even though their introductory rates may seem very attractive, if you opt for an adjustable rate mortgage (ARM), you may be slammed with a huge rate increase in the future when your rate adjusts if rates continue their upward climb. Because of this, a fixed rate mortgage may be the smarter choice if rates continue to rise. To stay on pace with current mortgage rate trends, refer to online rate trending graphs and check regularly.
Even though rates are rising, locking in a rate early and choosing the correct mortgage product should help reduce some of the risk associated with getting a mortgage in the current rate environment. You should always be sure to shop around to find the best rates and terms that meet your needs. Find the best deal locally by searching online rate tables. Be sure to consult your loan adviser to ensure you are getting the best rate and product for your individual situation.
Today, for the first time in nine months, the FOMC announced that it would not lower the Fed Funds Rate, the key interest rate set by the Federal Reserve. So what does this mean for mortgage rates?
While there is no direct tie between the Fed Funds rate and mortgage rates, historically the two rates tend to correlate over time. But as of late, this trend has not held true. For instance, even though the Fed lowered their key interest rate 25 basis points on April 30, the national average rate on a 5/1 ARM continued to rise 51 basis points from 5.29% on May 6 to 5.80% on June 24 (Source: Informa’s Interest Rate Review®).
Save money by refinancing before rates climb higher
If this trend continues, how long can you afford to wait before refinancing out of your adjustable rate mortgage into a fixed rate loan? A 50 basis point increase in your mortgage rate from 6.00% to 6.50% could increase your monthly principal and interest payment on a $200,000 mortgage from $1,199 to $1,264 a month. Securing the lower rate in this scenario could save you $65 a month, or $780 a year. Shop online to find the best available rates in your area.
Since mortgage rates seem to be rising despite Fed interest rate cuts, one smart way to keep up on how rates are changing is to check rate comparison tables regularly. Checking national average rates can give you a quick snapshot of how rates are changing, and perhaps, some insight into where they are going.
Times are Anything But Boring for the Fed
As the scheduled FOMC meeting gets underway on June 24th-25th, what direction should the Fed decide to take next? It’s quite a dilemma at the Fed, for if they were to raise rates, that could further dampen the condition of an already weakened economy and yet to lower rates again, would only serve to ignite the inflationary pressures evidenced by high fuel, food and many other commodities prices, it is also apparent in the unstable U.S. dollar. It would seem that the Fed is far more likely to tip the scale in favor of addressing the threat of inflation rather than that of the deteriorating economy. The sinking dollar, in conjunction with surging energy prices, may pose a more serious threat to the country’s overall economic health at this time. However most Fed watchers have not expected a rate increase to come out of the Fed until the end of the year, or possibly into next year, following the November elections. Currently it seems that nothing can go right with the economy sinking, inflation soaring and natural disasters mounting (such as the massive flooding occurring in the mid-west) while the financial markets are tumbling, all occurring in the midst of an election year where a wait and see approach may prevail as the country changes course both politically as well as economically.
The quick and easy answer is that you should see a slight drop in adjustable rate mortgage (ARM) rates but fixed rates should remain relatively unchanged.
In loose correlation with the fed rate, ARM rates peaked in September 2007 (with the national average for a Jumbo3/1 ARM at 6.848%) and fell by an average of 16 basis points in October 2007. Rates stabilized in the three months following, averaging 6.389% for the Jumbo 3/1 ARM’s nationally. The lowest mortgage rates occurred in February 2008 (5.995%), which mirrored rates from the previous year in March 2007 (5.994%). Overall, March 2008 rates are displaying a slight increase (of about 0.125%) compared to rates only one year ago.
Based on the latest fed rate cut, adjustable mortgage products may remain stable or reflect a slight change. Use convenient rate tables to stay updated on the rates currently available in your area.
Fixed-Rate Mortgages: Types and Benefits
In a time when the housing market is violently fluctuating, the economy is declining, and credit is tight, homeowners and borrowers are looking to the relative safety and security of fixed-rate mortgages.
These mortgages have always been a classic and popular option for their simplicity. When a borrower takes out a fixed-rate mortgage, they are receiving a locked interest rate for the term of the mortgage. No adjustable, changing rates; no movement to track or fret over. Over the life of this home loan, the borrowers pay a monthly payment that never changes, allowing homeowners to budget better and be prepared.
A monthly payment for a fixed-rate mortgage is comprised of two elements. Borrowers pay towards the principal, or the actual loan amount. They also pay interest on the principal, with the amount determined by the fixed interest rate. This interest is a tax-deductible expense, providing homeowners a significant advantage come tax-time. Over time, by paying towards the principal homeowners build equity, or ownership, in their home. Eventually, equity can be accessed as a source of funds, used for home repairs, college costs, vacations, or other options.
The most common terms for a fixed-rate mortgage are 15 and 30 years, but in recent years other options have become available, including 10-, 20-, 40-, and even 50-year terms. Common fixed-rate mortgages have their own advantages and disadvantages:
The 30-year fixed-rate mortgage is the most popular of the fixed-rate options, and is usually the easiest to quality for. This mortgage provides a low, unchanging amount from month to month. In trade for this lower payment, borrowers will pay more interest over time due to the long life of the loan.
The 15-year fixed-rate mortgage is another popular fixed-rate option. Borrowers who take on this mortgage will pay less interest over time, and build equity in their home at a faster rate than longer-term mortgages. The disadvantage of this mortgage is higher monthly payments, as principal and interest is condensed over a shorter period of time.
Fixed-rate mortgages are particularly helpful and practical for homeowners who intend to stay in their homes for a long or indefinite amount of time.
The main draw of fixed-rate mortgages can also become their drawback over time. Locking in an interest rate for a fixed-rate mortgage can be a great deal, as interest rates fluctuate and rise. But what happens when mortgage rates drop, and your fixed rate is costing you a bundle? It’s good to remember that fixed-rate mortgage borrowers do have options. Refinancing is available to those with good credit who pay their mortgage on time, and can take advantage of these lower rates.
Fannie Mae & Jumbo Mortgage Rates Just One Click!= Current Rate Chart
Fed Rates Keep Falling on My Head:
What the Fed Rate Cuts Mean for Your Savings and Mortgage
Source: Informa Research Services
(Jan 30, 2008) Today, the Fed slashed the Fed funds rate by 50 basis points. Like most things, dropping rates are a game of give and take; the lowering of Fed rates can be beneficial for some parts of your financial life and detrimental for others. So how exactly can you make the most of the most recent Fed rate cuts?
What does the Fed rate cut mean for my mortgage?
Not all mortgages are directly linked to the Fed rate, but adjustable rate mortgages (ARMs)are one type that is influenced by the Fed rate. Thus, ARM rates were affected by last week’s drastic Fed rate drop. In fact, just within the past week since the last Fed cut, the APR on a 5/1 ARMdropped from 5.65% to 5.25% based on Informa’s National Averages (Source: Interest Rate Review®, Informa Research Services).
What about my other loans?
Because the Prime Rate is the key index used to determine the variable rates, such as credit cards and home equity lines of credit (HELOCs), the rates associated with these types of loans can be affected by the change.
And what is going to happen to my savings efforts?
Since the Fed’s rate cut last Tuesday, average deposit product interest rates have dipped as expected, but there has been no uniform decrease across the board. For example, the interest rates on 3-, 6-, 12-, 24-, and 36-month certificates of deposit (CDs)(at $25,000) dropped an average of 20-30 basis points according to Informa’s National Averages report. On the other hand, the rates for checking accountsdropped only 2 basis points (Source: Interest Rate Review®, Informa Research Services).
Despite some drastic rate drops due to the emergency Fed rate cuts last Tuesday, it is very unclear whether or not the most recent reduction will incur the same reaction. Because today’s Fed rate cut was widely anticipated, some of the slashed rates over the past week may have been anticipated and incorporated into the rates offered today. However, one thing that may be expected is the volatility of today’s rate environment.
“One thing we’ve noticed is that [financial institutions] are quicker to drop rates than to raise them,” said Ray Montague, Deposit Research Manager at Informa Research Services. Looking at historical trends, when the Fed drops rates, deposit product rates tend to follow the Fed’s moves very closely and drop rates quickly. On the other hand, when the Fed raises rates, deposit product rates tend to stray behind and raise their rates slowly.
So what now? What should I do with my savings and deposits?
Despite falling rates, there is still hope for those looking to save. Regardless of where Fed rates stand, financial institutions will continue to offer promotional and teaser rates to attract new customers. If you are finding it difficult to judge what is competitive in the current rate environment, remember to use the sorting feature available on many of the online rate tables. Additionally, checking ratesregularly and staying informed of what rate changes mean for you can help you properly gauge what is best for your situation.
About 30 Year and 15 Year Fixed Mortgages
One of the most popular types of mortgages is the 30 year fixed-rate mortgage. This loan is usually the easiest to qualify for, and provides the maximum interest deduction at tax time. The interest rate stays the same over the life of the loan, which provides unchanging, low monthly payments. Over time, borrowers gain equity in the home as they pay down the principal, or actual loan amount. For borrowers who intend on staying in the home for a long time, this mortgage is particularly helpful and practical. A disadvantage of the 30-year fixed-rate mortgage is paying more interest over time than shorter-period loans.
A 15 year fixed rate mortgage features interest payments fixed at a specified level for specified period of time (15 years), meaning you will pay the same amount of interest for a specified term. This allows you to budget more effectively at the start of your mortgage. Among fixed-rate loans, it offers the lowest amount of interest paid over the term of the loan, while providing for a never-changing monthly payment schedule. The drawback for 15-year fixed-rate mortgages is the increased monthly payments, as principal and interest is condensed over a shorter period of time.
Fannie Mae & Jumbo Mortgage Rates Just One Click!= Current Rate Chart
