A Guide to Your Mortgage Interest Rate

 

A Guide to Your Mortgage Interest Rate  

Mortgage interest rates are a reflection of how much risk a borrower and their new home can possibly carry. The less risk your lender feels, the likelihood of you receiving a positive interest rate will increase.

But hey, no worries, you’re more in control than you think. Beyond external forces like the housing market and general inflation, listed below are the ingredients of a mortgage interest rate that you have complete control over.

Credit Scores

The best-known detail of a mortgage rate is your FICO credit score. Before you start any mortgage shopping, check it out and review your credit reports for errors. Certain slip-ups can lead to a lower score, preventing you from qualifying for better loan rates and terms. Make sure to check this early in the process. Lenders are looking to offer mortgages to those with high credit scores, and the higher your score, the lower the rate you might qualify for.

Below is a recap of what affects your score:

• Late payments: If you don’t pay things on time, had an account sent to collection or declared bankruptcy, these all can negatively impact your credit score.
   
• Length of time on open trade lines: Sometimes a short history can have a negative impact, but if you’re making payments on time and have low balances, you can offset that negative impact
   
• Number of inquiries in a short period of time: It might sound ruthless, but too much uncertainty about the state of your score can affect it negatively.
   
• Sprawling debt: If you’re spending too close to the limits, this could negatively affect your score as well. A healthy expenditure means you should use less than 20-30% of your available credit, keep good-standing accounts open for long periods of time and avoid opening too many new accounts.

Total Loan Amount

The size of a mortgage loan and, to a degree, the price of a home, is another influencer. Loans too large or small are perceived as bigger risks.

• Danger zone: If your loan exists in the sweet spot between $100,000 and $766,550, then you’ll have fewer chances of a spike in your interest rate. Living outside those lines might cost an extra nickel. 

Home Location

One of the more overlooked factors is the health of the housing market within a state or county. If a lender is less worried about the area’s risk of default, you’ll likely see a lower rate. The surrounding house prices can also make an impact. Living near water (more expensive) or in a rural area (less expensive) could change the amount of your mortgage and put you into the zone where lenders may charge a higher rate.

Loan Term & Type

Or, in other words, promptness and assistance.

Your loan’s term is how long you have to pay back the loan. Usually, you'll find that short-term loans have lower interest rates but do have higher monthly payments.

Regarding the types of loans, there are several broad categories of assistance, such as conventional, FHA, USDA and VA loans. Rates significantly differ based on which type you choose. Conventional loans require anything between a 3-20% down payment, while FHA needs as little as 3.5%, and it can offer more attractive interest rates. A similarity between the two is that conventional loans and FHA loans require homeowners to purchase private mortgage insurance (PMI), but with conventional loans, you only need PMI if you don’t pay the full 20% down payment. PMI helps protect the lender against default should a buyer not make a payment. Different loans can yield different rates and results.

For both terms and types, be sure to ask your lender to compare the options for you.

Finally...

When shopping for mortgage rates, be aware that the one you get over the phone could be completely different in a matter of minutes. Lenders can’t always guarantee a locked-in rate until they have a fully executed contract on the home you’re purchasing.

It’s not just one ingredient over the other — each factor contributes to the overall recipe that’s personally refined by you. All you need to do is keep these five major components under your scrutiny and your long-term wealth will rest much easier.

Team Lasson is here for all of your home buying needs!  If you’re thinking about making the leap into home ownership in the near future, please contact us today to get started.  We can help you determine what loan program works best for your financial goals.  The first step in preparing for your big purchase is to get pre-approved for a mortgage at Lake of the Ozarks.  Please visit www.yourlakeloan.com or give us a call at (573) 216-7258 to get started.

Michael Lasson

Senior Mortgage Banker

NMLS #:  493712

Flat Branch Home Loans – Team Lasson

2882 Bagnell Dam Blvd

Lake Ozark, MO 65049

Cell:  (573) 216-7258

Email:  teamlasson@fbhl.com

Website:  www.yourlakeloan.com

**The postings on this site are my own and do not necessarily represent Flat Branch Home Loans positions, strategies, or opinions.

Flat Branch Home Loans NMLS 224149. A Division of Flat Branch Mortgage Inc. For more licensing information, visit NMLSConsumerAccess.org

 

Mortgage Market Update - July

The lending market fluctuates on a regular basis. There are many factors that impact the current rates. Our experienced mortgage lender in Osage Beach, MO keeps up with the daily changes that impact our clients. If you're thinking about purchasing a home at Lake of the Ozarks or refinancing your home in the near future, we'd love to chat about what the current rate situation can mean for you and your loan. Check out a recent update from Mortgage Market Guide to learn more about the current market conditions:

A few weeks ago, some weak economic signals sparked increasing fears of a recession. Let's walk through what happened and look ahead to the future.

"While the Present Situation Index was relatively unchanged, the Expectations Index continued its recent downward trajectory - falling to its lowest point in nearly a decade. Consumers' grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year end." The Conference Board's Consumer Confidence Report.

This reading is important because if pessimism begins to negatively affect consumer spending, the chance of a recession will rise sharply as consumer spending makes up two-thirds of our economic growth.

A few weeks ago, the third and final reading of 1st Quarter GDP showed the economy shrank by 1.6%, worse than expectations of -1.5%. A recession is defined by two quarters of negative growth. The 2nd quarter is forecasted to barely grow, which means we will be in or close to a recession in the 1st half of 2022.

The silver lining about all this recession talk? It will put a limit to how high rates go. We are two weeks past the 3.49% peak in rates which ironically happened when the Fed raised the Fed Funds rate by .75%.

Bottom line: Long-term rates have stabilized but we should not expect much more improvement until inflation moderates further. With that said, if you are interested in purchasing a home, it remains a great time with rates beneath the rate of inflation.

Looking Ahead

We will receive important employment readings by way of the ADP Report and Jobs Report. The Fed wants to slow down the labor market and we have already seen layoff announcements in corporate America, so we will see if that is reflected in the coming week's figures.

We know the interest rates can seem intimidating to navigate but we've been in the industry for over 20 years and we're confident as we navigate these changes. Put our experience to work for you as you plan to buy a home at Lake of the Ozarks. If you're ready to learn what kind of rate you qualify for you, give Team Lasson a call at (573) 746-7211 or visit our website at www.yourlakeloan.com!

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct: (573) 746-7211

Cell: (573) 216-7258

e-Fax: (866) 397-0318

Email: mlasson@fsbfinancial.com

Website: www.YourLakeLoan.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

How is My Mortgage Rate Calculated?

 Have you been thinking about obtaining a mortgage at Lake of the Ozarks? If so, you've likely done your homework on mortgages and what's important when obtaining one. One of the most important things for many homeowners is their interest rate. But how are they determined? Well, this week's blog, I am going to inform you of the factors that are considered when it comes to mortgage rates. Continue reading to learn more!

Interest Rate Factors That You Control

There are several factors when mortgage rates are calculated that you as the borrower can control. Those factors are:

Credit Score

To put it simply, the higher your credit score, the more competitive your rate will be. Typically, borrower with scores at 740 or higher receive the prime rates. Tapering off as your score lessens. Certain loan products, such as fixed rate mortgages are only available to borrowers with scores above 620.

Loan-to-Value Ratio

Your loan-to-value ratio is also a factor in your mortgage rate.  This ratio measures the mortgage amount to the price or value of the home. For example, a $100,000 home that you plan to put $20,000 down on would have an LTV of 80%. If your LTV is above 80%, the lender is taking additional risk lending on the property and as such may increase the mortgage rate, especially if you have a subpar credit score. Loans with an LTV above 80% could also require private mortgage insurance as well. 

Type of Loan

The type of loan you're obtaining will also have a direct impact on the interest rates available. For instance, a purchase of a primary and second home may vary, as well as mortgages on manufactured homes, investment property, and condos. Cash-out refinances may also have varying rates as opposed to a purchase loan. 

Mortgage Rate Factors Out of Your Control

Just as there are factors that you can control that effect your mortgage rate, there are also factors beyond your ability to control.

Economy

Mortgages rates typically fall when the economy is slowing down, inflation is falling, and the unemployment rate is rising. This helps to stimulate the mortgage industry by offering great rate incentives. Rates tend to rise when the economy is trending for fast growth, higher inflation, and a low unemployment rate.

Inflation

When inflation is on the rise, rates often trend  upwards to help mitigate the loss of the dollar losing value. Helping lenders continue to function regularly while still providing essential services to their community.

Job Growth

Job growth affects the mortgage industry, as it assists people during recessions to lower their payments and maintain good standing with their mortgage. As the employment rates begin to rise, so to do the mortgage rates.

Economical Indicators/Forecasts

Other factors that influence mortgage rates include retail sales, home sales, housing starts and development, corporate earnings, and stock prices. 

The Federal Reserve

While the Federal Reserve doesn't set mortgage rates, they do raise and cut short-term interest rates based on sweeping shifts in the economy. Mortgage rates rise and fall based on those same economic factors, so it's likely that they will follow a similar trend.

I hope that you've found this week's blog informative in helping to understand the factors that influence mortgage rates and are able to confidently shop for a competitive rate. If you own a home or are looking to buy a home at Lake of the Ozarks, interest rates are still very low. I would be happy to discuss your options for obtaining a mortgage at Lake of the Ozarks and help you close on a purchase or refinance a home here.

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct: (573) 746-7211

Cell: (573) 216-7258

e-Fax: (866) 397-0318

Email: mlasson@fsbfinancial.com

Website: www.YourLakeLoan.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

How Interest Rates are Determined on a Macroeconomic Level

When you purchase a home and take out a mortgage at the Lake of the Ozarks, you will be paying back that loan with interest. An interest rate is the cost of borrowing money, and it varies from situation to situation. While the specific interest rate you will be offered takes many factors of your personal life into consideration, outside influences affect what interest rates are available at a certain point in time. Prevailing interest rates are always changing, but why? Today’s blog takes a look at the bigger picture of how interest rates are determined on a macroeconomic level.

The Federal Reserve

The Federal Reserve is the Fed’s monetary policymaking body. While it is an instrument of the U.S. government, it is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government. It is charged with maintaining the stability of the nation’s financial system, by taking action to raise or lower short-term interest rates in an effort to keep things stable. The Federal Reserve sets the “Federal Funds Rate”, which is the rate that institutions charge each other for extremely short-term loans. This rate slowly trickles down into other short-term lending rates, such as mortgages. When the Fed Funds Rate increases, eventually, so do mortgage rates.

The Condition of the Economy

How well the economy is doing is a factor that the Federal Reserve looks at when determining whether to raise or lower the Federal Funds Rate. When the economy is doing well or growing, companies are profitable, unemployment is low and consumers are spending money, the Fed acts to raise short-term rates in an effort to slow the economy from growing too quickly and increasing inflation. Inversely, when the economy is contracting or slowing too much, the Fed acts to lower the Federal Funds Rate in an effort to speed up the economy by making it easier for consumers and businesses to borrow money. This keep people employed and keeps the economy from sinking into a recession.

Supply and Demand

Another economic factor that comes into play is the supply and demand of credit. The supply of credit is increased by an increase in the amount of money that’s made available to borrowers. For example, when a consumer opens a bank account, depending on the type of account, that bank can use that money to lend out to other customers. An increase in supply of credit can reduce interest rates, while a decrease can raise them. Conversely, an increase in the demand for credit can raise interest rates, while a decrease in demand can lower them.

As a borrower, it’s important for you to understand these changes. Your Lake of the Ozarks mortgage lender doesn’t personally determine the rates available to you. Your rate is determined by an array of factors, economic and personal. To learn more about what interest rates are available to you at this time, talk to a mortgage professional. Give Lakelender Michael Lasson a call at 573-746-7211 today! 

For Lake area news, resources and tips on financial services, please 

LIKE my Facebook Page, Follow me on Twitter or Connect on LinkedIn

Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct: (573) 746-7211

Cell: (573) 216-7258

e-Fax: (866) 397-0318

Email: mlasson@fsbfinancial.com

Website: www.YourLakeLoan.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

What does the "Government Shut Down" Mean for Mortgage Rates?

"What we've got here is a failure to communicate." 

Hopefully, that famous line from the 1967 movie Cool Hand Luke won't apply to our leaders on Capitol Hill, as they work toward a resolution on the debt ceiling debate and budget fight. Read on to learn what this could mean for home loan rates.Congress continues to debate whether to raise the debt ceiling, which is now at $16.7 trillion. Although the debt limit deadline is today, the Treasury Department has said that it has enough funding to operate as usual until October 17. Failure to raise the debt limit by October 17 would most likely lead to an unprecedented default on the United States' bills. And of course, since no deal was met, we have a partial government shutdown

The uncertainty over these issues helped Mortgage Bonds improve,  as investors moved their money to safer investments like Bonds as they often do in times of uncertainty. Since home loan rates are tied to Mortgage Bonds, this also helped home loan rates improve last week.

In housing news, Case Shiller reported that its 20-City Home Price Index for July rose by 12.4 percent compared to July 2012. This is the fastest annual pace since 2006. However, from June to July there was only a 1.8 percent increase, which is the smallest monthly gain since March, as 15 of the 20 cities saw slower growth. This slowdown can be attributed to the rise in home loan rates over the past few months. New Home Sales did increase by nearly 8 percent in August from July.

Also of note, the government reported that the final reading on Q2 Gross Domestic Product was in line at 2.5 percent and unchanged from the second reading. Inflation as measured by Personal Consumption Expenditures remained tame in August while Personal Incomes and Spending were in line with estimates. These readings give the Fed cover to continue its Bond purchase program known as Quantitative Easing, which has helped home loan rates remain attractive.

The bottom line is that home loan rates remain attractive compared to historical levels and now remains a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

We would love the opportunity to help you manage your Lake of the Ozarks Mortgage Loan or refinance.  Give me a call at (573) 746-7211 or send me an email at mlasson@fsbfinancial.com with any questions you may have!!

For Lake area news, resources and tips on financial services, please 

LIKE my Facebook Page, Follow me on Twitter or Connect on LinkedIn

Michael Lasson

Sr. Residential Mortgage Lender

2265 Bagnell Dam Blvd, Suite B

PO Box 1449

Lake Ozark, MO 65049

Direct:  (573) 746-7211

Cell: (573) 216-7258

Fax:(573) 693-9141

Email:  mlasson@fsbfinancial.com

NMLS #: 493712