I am a first time home buyer and I’m a little confused about the way interest rates work.
When I first talked to the loan officer, she told me that the current rates were around 6.6%. By the time I started filling out the paper work a couple of weeks later, she said that they were up to around 7%. I still haven’t locked in a rate and now she says the rates are almost 7.5%.
Every website that I go on says that the rates have dropped for the first time in over a month and that they are still under 7%.
My question is where is she getting her information from? Is there a certain site that I should be going to check the rates? Is she just trying to rip me off knowing that I am a first time buyer?
I am getting a 30 year fixed loan with no points and 20% down payment.
Any info you can give me is greatly appreciated.
Thanks.
The feds raised interest rates again a week or so ago too. It ends up falling back upon everyone else when they raise or lower interest rates based on the interest of the market. It is a long chain of events to explain how it affects the stock market and industries, but because of loans, then companies expanding, then the weak companies being weeded out with higher interest rates keeps the market strong and competitive.
I’m a mortgage broker…don’t work in Michigan though. If you have good credit and your loan amount is under $417,000 you should be looking at around 6.75% with no points. You might want to call another mortgage company. PM me if you have ?'s.
[quote]timmyboy5410 wrote:
I am a first time home buyer and I’m a little confused about the way interest rates work.
Any info you can give me is greatly appreciated.[/quote]
I’m an Economist and let me just reiterate what has been said above: the interest rates have indeed been rising steadily in the past couple of months – to put it simply, because there are fears of inflation – but indeed the rates you have been quoted seem a tad on the high side, unless your credit score is under 630, in which case they make some sense, considering we are talking about a 30-year fixed rate.
Having said that, at this point I STRONGLY recommend an ARM (Adjustable Rate Mortgage), especially if you can (as you should) get a lower interest rate there. Interest rates are bound to go down again in a couple of years, and if you have an ARM you do not need to refinance to benefit from it. Fixed rate mortgages are a pretty bad deal right now.
Be careful with those ARM’s…inflation should continue to edge up with higher and higher energy ( oil ) prices which means that rates will stay high. Just my 0.02.
Our economy runs on cheap oil which doesn’t look as if we will ever happen again. In fact, given china and india’s growing thirst for oil, energy prices should get higher and thus, inflation. Higher inflation leads to higher interest rates.
[quote]lumbernac wrote:
Be careful with those ARM’s…inflation should continue to edge up with higher and higher energy ( oil ) prices which means that rates will stay high. Just my 0.02.
Our economy runs on cheap oil which doesn’t look as if we will ever happen again. In fact, given china and india’s growing thirst for oil, energy prices should get higher and thus, inflation. Higher inflation leads to higher interest rates.[/quote]
That is incorrect, actually. Interest rates are influenced by core inflation, which does NOT include energy prices… You can argue that increased energy prices increase the costs for companies and hence drive core inflation too, but that is counteracted by demand inelasticity – i.e., demand will start going down after a while, which drives the prices down, not up.
Although I agree interest rates will stay high for the next couple of years, trust me, they will go down after that.
[quote]viking power wrote:
I’m a mortgage broker…don’t work in Michigan though. If you have good credit and your loan amount is under $417,000 you should be looking at around 6.75% with no points.[/quote]
Assuming good credit, I’d set that as the upper limit. He should be able to get 6.5% with no points right now.
Who are you doing your mortgage through? Be careful, there are many questionable mortgage companies in Michigan. I have used lasalle/standard federal for all of my loans, as they don’t sell off their loans after close. Current rates at lasalle are 6.875%
[quote]Testy1 wrote:
Who are you doing your mortgage through? Be careful, there are many questionable mortgage companies in Michigan. I have used lasalle/standard federal for all of my loans, as they don’t sell off their loans after close. Current rates at lasalle are 6.875%[/quote]
Selling of mortgages in the secondary market is no big deal and very common. Also keep in mind that LaSalle may keep the servicing of their loans but still sell them. At the end of the day LaSalle/Standard Fed is a good bank but the selling of loans does not make a bank.lender/broker bad.
[quote]hspder wrote:
lumbernac wrote:
Be careful with those ARM’s…inflation should continue to edge up with higher and higher energy ( oil ) prices which means that rates will stay high. Just my 0.02.
Our economy runs on cheap oil which doesn’t look as if we will ever happen again. In fact, given china and india’s growing thirst for oil, energy prices should get higher and thus, inflation. Higher inflation leads to higher interest rates.
That is incorrect, actually. Interest rates are influenced by core inflation, which does NOT include energy prices… You can argue that increased energy prices increase the costs for companies and hence drive core inflation too, but that is counteracted by demand inelasticity – i.e., demand will start going down after a while, which drives the prices down, not up.
Although I agree interest rates will stay high for the next couple of years, trust me, they will go down after that.
[/quote]
Hmm, I was under the impression that interest rates were “influenced” by the prime rate, which is “influenced” by the Fed, which is “influenced” by the inflation caused by the printing presses (real or digital). How does the supply of currency react to the demand for it? I would say there is an unlimited demand for currency, how does the supplier of currency decide how much to produce?
Will you agree to pay the difference on our mortgage payments if the rates go up if we agree to give you the difference when(if) they go down? Then I will “trust you” and get an ARM.
[quote]hspder wrote:
lumbernac wrote:
Be careful with those ARM’s…inflation should continue to edge up with higher and higher energy ( oil ) prices which means that rates will stay high. Just my 0.02.
Our economy runs on cheap oil which doesn’t look as if we will ever happen again. In fact, given china and india’s growing thirst for oil, energy prices should get higher and thus, inflation. Higher inflation leads to higher interest rates.
That is incorrect, actually. Interest rates are influenced by core inflation, which does NOT include energy prices… You can argue that increased energy prices increase the costs for companies and hence drive core inflation too, but that is counteracted by demand inelasticity – i.e., demand will start going down after a while, which drives the prices down, not up.
Although I agree interest rates will stay high for the next couple of years, trust me, they will go down after that.
[/quote]
Mortgage interest rates are strongly influenced by the 10 year bond. And being an economist you know that inflation is only one of the factors thats influences the yield of the 10 year. Typically as the 10 year yield rises the mortgage rates rise. For instance; last week the 10 year was yielding anywhere from 5.16 to 5.22 this week it has come in as low as 5.09 I think and we have seen a small decrease in mortgage rates. Good point on inflation though because they has definitely played a factor in the mortgage market.
[quote]hspder wrote:
timmyboy5410 wrote:
I am a first time home buyer and I’m a little confused about the way interest rates work.
Any info you can give me is greatly appreciated.
I’m an Economist and let me just reiterate what has been said above: the interest rates have indeed been rising steadily in the past couple of months – to put it simply, because there are fears of inflation – but indeed the rates you have been quoted seem a tad on the high side, unless your credit score is under 630, in which case they make some sense, considering we are talking about a 30-year fixed rate.
Having said that, at this point I STRONGLY recommend an ARM (Adjustable Rate Mortgage), especially if you can (as you should) get a lower interest rate there. Interest rates are bound to go down again in a couple of years, and if you have an ARM you do not need to refinance to benefit from it. Fixed rate mortgages are a pretty bad deal right now.
[/quote]
Timmy I sent you a PM.
Right now the 3/1 and 5/1 ARMS really aren’t much lower if lower at all than a 30 year fixed. So if someone wants to gamble and possibly save themselves as little as 12.5 bps on their rate then go ahead and go with the ARM.
[quote]timmyboy5410 wrote:
I am a first time home buyer and I’m a little confused about the way interest rates work.
When I first talked to the loan officer, she told me that the current rates were around 6.6%. By the time I started filling out the paper work a couple of weeks later, she said that they were up to around 7%. I still haven’t locked in a rate and now she says the rates are almost 7.5%.
Every website that I go on says that the rates have dropped for the first time in over a month and that they are still under 7%.
My question is where is she getting her information from? Is there a certain site that I should be going to check the rates? Is she just trying to rip me off knowing that I am a first time buyer?
I am getting a 30 year fixed loan with no points and 20% down payment.
Any info you can give me is greatly appreciated.
Thanks. [/quote]
Did anything change on your loan? Was she not able to document or prove your income? That can make a difference after review of all of your income docs.
[quote]trailrash wrote:
Testy1 wrote:
Who are you doing your mortgage through? Be careful, there are many questionable mortgage companies in Michigan. I have used lasalle/standard federal for all of my loans, as they don’t sell off their loans after close. Current rates at lasalle are 6.875%
Selling of mortgages in the secondary market is no big deal and very common. Also keep in mind that LaSalle may keep the servicing of their loans but still sell them. At the end of the day LaSalle/Standard Fed is a good bank but the selling of loans does not make a bank.lender/broker bad.
[/quote]
While what you say is true, I personally don’t like it when where I send my payment changes. Also, it is nice to be able to walk into the bank to make a payment if need be. The one time I didn’t go with standard federal my payment info changed three times and I HAD to mail my payment.
I’m a loan officer in San Antonio, TX, and if your borrowing 100%, with a 660+ middle FICO, your interest rate should be between 6.75%-7%. If you plan to live in the home for more than 5 years, I’d go with a fixed rate, an ARM can blow up on you in no time. Also, make sure your not paying Mortgage Insurance.
If anyone is looking for a second home or investment property in SA hit me up, the market here is going to boom.
I happen to believe that in the next few years (3-7) we will be retesting mortgage interest rate lows. However, the standard rule of thumb for deciding if you should get a fixed or ARM is if rates are trending up, go fixed. If rates are going down go ARM. Currently rates are trending up so a fixed would be in order.
Getting back to the original poster. It sounds like you should find a different lender.
By the way, the interest rate on my home loan is 3.75%. Hehehe. South Africa, eat your heart out! I’m locked in for another 4 years when it will become a 1 year adjustable with a cap at 8.75. My plan is to pay huge chuncks off the mortgage if the rate ever goes above 6.25.
[quote]jm85 wrote:
I’m a loan officer in San Antonio, TX, and if your borrowing 100%, with a 660+ middle FICO, your interest rate should be between 6.75%-7%. If you plan to live in the home for more than 5 years, I’d go with a fixed rate, an ARM can blow up on you in no time. Also, make sure your not paying Mortgage Insurance.
If anyone is looking for a second home or investment property in SA hit me up, the market here is going to boom.[/quote]
He is at an 80% LTV… You can get a 6.75-7% on a 30 year fixed with no PMI on a 1 loan to 100% LTV? Who is your investor and what are the costs? everyone here needs to keep in mind that rates do very state to state and Michigan rates at the moment are being hit by banks.