My First Mortgage - Home Mortgage Rates

Home Mortgage Rates - Making Up The Monster

What influences your home mortgage rates? The interest rates on your home mortgage are perhaps the most pressing and important factors acting on you loan. Mortgage rates influence the amount of initial money you can borrow on your loan, they influence you monthly payment amounts and the overall interest you pay for your loan. A slight change in the rate can mean enormous financial repercussions in the future of your loan, but the question remains; what influences your rate?

The financial index - your home mortgage rate base

The base factor determining your home mortgage rate is the financial index your mortgage is based upon. These indexes are financial indicators of the state of the national economy and include, but are not limited to: treasury notes, COFI, CODI, and LIBOR. These indexes take into consideration national employment levels and the national debt and in turn effect your home mortgage rates. In general:

when the economy is good, people are looking for homes and the rates are high
in times of economic crisis home purchases drop, the speculation in home ownership declines and interest rates fall according to the demand.

The next step - your financial lender

Next up in influencing your home mortgage rates is your lender herself, and we all hope she is kind. On top of the nationally recognized indexes listed above, the lenders themselves add margins to the loan amount. These margins are nothing but profit for the lender or broker you are going through to get your loan. While a margin is a necessary evil in your home mortgage rates, they are easily controlled by:

competition between lenders and
rate caps that hold down the change in future interest if you are one of the many with an ARM.

Speak with your lender and know your margins and be aware of adjustment rate caps and maximum rates. AARM does no good if its rate caps are too high or the ceiling for the home mortgage rates is far above the current rate. You might be better off with a fixed rate mortgage.

The final step - you, and you alone

You and your personal financial situation are the biggest factor influencing your home mortgage rates. Several factors can increase the home mortgage rates you can expect to pay:

a poor credit history
an unstable employment record
a tendency to move far and often.

Not only will your home mortgage rates be higher, but qualifying for a home mortgage in the first place will be difficult to say the very least. be aware of your personal financial situation and prepare yourself for any variance you may face in your home mortgage loans.