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Home Mortgage Rates
Mortgage Rate Make Up
In general, mortgage rates are derived from the combination of two factors . the 10 Year Treasury Yield and the Lender Mortgage Spread Risk Premium.
The 10 Year Treasury Yield runs opposite to the 10 Year bond price. As investors buy bonds, the bond price increases and the yield decreases. When the treasury yield declines, mortgage rates go down.
The Lender Mortgage Spread Premium is the spread or profit that investors require to buy mortgages. Historically, the spread has remained fairly constant in the 1.5% range, but that has changed in recent times due to and uneasy mortgage market. Because of this implied risk to investors, the spread premium has been holding in the 2.25% range for some time.
Luckily for home mortgage shoppers, the 10 Year Treasury Yields remain near historic lows. This is keeping current mortgage rates at near historic levels in kind.
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Where to find Low
Current Home Mortgage Rates
You now know what makes up mortgage rates. So, where do you go to find great home mortgage rate options?
Home mortgage lenders affiliated with a national network of major current banks and investors can really make a positive difference for low mortgage rates.
Keep in mind that lenders with a national bank network will not be worth much if they do not utilize a rate quote retrieval software system to access all the best mortgage rates with the click of a mouse. Unfortunately, a large percentage of mortgage brokers still use the outdated and borrower costly approach of manually accessing individual lender rate sheets.
Working with a home mortgage lender that has Direct Lender Status will also bring your mortgage rates down.
Home mortgage lenders that consolidate costs and reduce overhead will be able to pass along these savings to their borrowers. Use of technology and corporate structure can have a big impact on mortgage rates savings for home loan shoppers.
Correct Home Mortgage Lender Choice equals Excellent Current Mortgage Rates
There can be a big difference in mortgage rates among home mortgage lenders, and choosing the right one can save you hundreds monthly and multiple thousands over the term of your new home mortgage!
We have access to home mortgage lenders that utilize the rate cutting methods mentioned previously, and now, so do you!
Request a free mortgage rates comparison quote with us for your access to the low mortgage rates available today.
Jumbo Home Mortgage Rates Now Cheaper
The size of home mortgage loans that can be guaranteed by Fannie and Freddie has been raised by the Office of Federal Housing Enterprise Oversight. A mortgage of over $417,000 was previously considered a "Jumbo" loan and typically carried a 1% or more increase in cost as compared to conforming home mortgage rates. The new limit will lower Jumbo home mortgage rates. The new home mortgage limits vary by area based on local median home prices and can go as high as $793,750.
Home Mortgage Closing Costs
Home mortgage closing costs are an important focus for home loan shoppers. We'll go over the major home mortgage lender closing costs and settlement fees you will encounter.
Home mortgage closing costs can be separated into 4 major categories:
1) Lender fees
2) Third Party fees
3) Pre-Paids & Escrow
4) Government taxes and fees.
Home Mortgage Closing Costs: Lender Fees
The following list of common Lender Fees includes the most common and significant portion of closing costs you will encounter. This is not an all-inclusive list, but reveals the fees you should pay close attention to. Keep in mind that home mortgage lenders continually come up with new names and fees to charge.
Lender fee amounts and terms vary widely, but the key is really just to compare the "Bottom Line" totals from each competing lender good faith estimate that you receive.
Discount Fee or (Discount Points)
Closing Costs: Application Fee - This application fee is charged by home mortgage lenders to cover administrative costs, and typically ranges from $250 to $750.
Closing Costs: Origination Fee - The major fee that a home loan lender charges to make a profit on a loan. This fee covers the lender's loan origination,and is applied toward closing costs.
It is stated in "percentage of the loan amount". So, if you are financing $100,000 and the origination fee is 1%, the total loan origination fee is $1,000 for your mortgage. This is not a "junk fee". Your home mortgage lender has operating costs and requires a profit in order to stay in business. Common and reasonable loan origination fees are between 1% and 2%.
Your good faith estimate may show no origination fee, or a very small percentage. Be careful in this scenario because a low origination fee may be covered by a high application fee, processing fee, or combination of fees added to your home mortgage closing costs.
Low mortgage origination fees may also be covering the fact that your lender is charging a higher rate of interest than the par rate (lenders base rate) to make a profit through Yield Spread Premium (YSP). YSP is the cash rebate paid to a mortgage broker based on selling an interest rate above the wholesale par rate. Compare your good faith estimates from competing home mortgage lenders at the same rate of interest. This will clue you in on the true origination fee charged by the home mortgage lender.
Closing Costs: Processing Fee - Home mortgage lenders commonly charge a processing fee to cover the cost of the loan processor's duties in coordinating your loan to closing. The processing fee is typically ranges from $500 to $750.
Closing Costs: Underwriting Fee - A lender underwriting fee is charged to cover the expense of underwriting your mortgage. Where a mortgage broker is concerned (loans filled through third party lenders), this fee is usually a charge-back to the broker and passed back to the consumer's closing costs at the home lender's actual cost.
Concerning direct mortgage lenders (underwrites the loan in-house), typically the underwriting fee is also passed back to the consumer. This fee should be in the several hundred-dollar range.
Closing Costs: Discount Fee (Discount Points)- Discount points are paid to a lender at closing in order to lower your mortgage rate. A discount point costs 1% of the total loan amount and each point lowers your mortgage rate by one-eighth to one one-quarter of your interest rate.
For instance, with a 30 year fixed rate $150,000 home mortgage, each point costs $1,500. If the initial par mortgage rate is 6.0% and each point lowers the rate by 0.25%, purchasing 2 points costs $3,000 resulting in a 5.5% mortgage rate.
You can calculate the breakeven point to determine if discount points are worth the expense.
The previous example, and no points at 6.0%, the monthly principal and interest loan payment is $899.33 per month. Purchasing 2 discount points brings the principal and interest payment down to $851.68 per month at 5.5%. Resulting in total monthly savings of $47.65 and costing $3,000. The breakeven point is 62.96 months in this instance ($3,000 divided by $47.65).
Stay with the home mortgage for more than 63 months and your discount point purchase is a good deal.
Home Mortgage Closing Costs:
Third Party Fees
Third Party fees are the part of closing costs incurred through the use of third parties that perform loan process tasks. These fees are collected by the home mortgage lender and dispersed directly to the third party vendors upon loan closing.
The most significant fees in this area are title insurance charges and the appraiser fee.
Home Mortgage Title Insurance - Title insurance protects against loss connected to the title claims on your property. Home mortgage lenders require title insurance and charges vary based on loan size, the property location, and the title company utilized.
Title insurance cost varies widely, but is usually around .5% of the home loan amount.
Home Mortgage Closing Fee - Dispersed to the title company or attorney for conducting borrower closing. Closing fees typically range between $200 and $500.
Home Mortgage Appraisal - Appraisals are required to determine the market value of the home.
Appraisals are required by home mortgage lenders before a clear-to-close decision is given. Your lender wants to make sure the loan amount is not greater than the value of your home. Also, value needs validation to determine that the pre-qualified the Loan-to-Value ratio remains intact.
Appraisal cost usually runs $300 and $500.
Home Mortgage Closing Costs:
Pre-Paids and Escrow
Home Mortgage Pre-Paid Interest - Interest paid at closing to get your interest paid up to the first of the month. This cost will vary depending on your interest rate and date of closing. For instance, if you close on the fifteenth day of August and your first mortgage payment is due September 1st, you will pay 15 days worth of pre-paid interest.
Home Mortgage Upfront Mortgage Insurance - Only for FHA home mortgages. This fee is usually 1.5% of your loan amount and paid upfront. In most cases, this charge is added back to the loan amount.
Home Mortgage Property Tax and Homeowners Insurance Escrow Deposit - Lenders may require monthly payments equal to 1/12 of yearly total taxes and homeowners insurance, also known as an escrow payment. This requirement comes in to play when a borrower finances more than 80% of their home's value. An initial escrow or impound account is set up to make sure there is always enough money available for the lender to make your property tax and insurance payments when they come due.
The following simple property tax escrow deposit example illustrates how initial deposits are calculated.
$2,400 per year property taxes are due on January 1st and your home mortgage is set to close on March 15 th . The first mortgage payment is due April 1 st .
When taxes come due for the following January 1st, the borrower will have made 10 monthly escrow payments of $200 totaling $2,000. The borrower's initial escrow deposit is $800 in this instance to cover for the 2 months shortfall (12 months due minus 10 months paid), plus the lender's required 2 months worth of additional reserves.
Home Mortgage Closing Costs:
Government Taxes and Fees
States and local governments may require a mortgage tax fee. These state and local government fees are dependent upon the area that you live. Many municipalities however, do not charge this tax, leaving a recording fee as you only government fee requirment.
Home Mortgage Recording Fees - Recording fees are charged by your local recording office. This covers the cost for the recording of your deed and mortgage.
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