How Interest
Rates are Determined by Banks
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Custom Quote on Today's Rates
(510) 793-8600
Interest rates change daily and sometimes even a couple of times during a
day.
Compare loan options with my
Loan Comparison Spreadsheet
Rates depend on:
(1) SUPPLY & DEMAND FOR MONEY
Trying to Predict Interest Rates /
Overview of
Mortgage Industry
Economic
Calendar /
Ten Yr Bond /
FOMC
Calendar / Economy
at a Glance)
Historical Rate Charts:
Prime
Rate |
6
Month LIBOR |
1 Year
LIBOR |
11th
District Cost of Funds Index
1
Year Treasury Rate (CMT) |
12 Month
Treasury Average |
More Indices
(2) LOAN PRODUCT - Fixed vs. ARM -
Loan Programs
(3) LOAN SIZE - Total current debt
on the property.
Conforming Loans go up to
$417,000,
Jumbo Loans are defined as between
$417,000 to $1,000,000, and
Super Jumbo Loans is anything
beyond $1,000,000.
(3) LOAN TO VALUE (LTV) - Total Debt
secured by the property divided by a
recent appraisal of the home. If your loan amount is more than 80% of
the
appraised value, the lender may charge you PMI (Private mortgage
insurance). PMI protects the lender against a loss if a borrower
defaults on
the loan. To avoid PMI, you'll want to structure your 1st position
loans to
be not more than 80% of the appraised value. Some lenders also offer
rate
incentives at lower LTVs.
(4) CREDIT FICO SCORE (Improving
Your Score)
A higher score is better. A score
of 720+ places an applicant in the best
programs. 680-719 is next best category, followed by 620-679 and than
500-619 (Worried
about your credit).
(5) DEBT TO INCOME RATIO (DTI) -
Total housing expense divided by gross
monthly income. Determines whether you can go Full Documentation
or
have to submit your application with lesser documentation (Stated
Income, No Ratio or No Doc).
(6) RATE LOCK PERIOD - Interest
rates and points vary by the length of time
needed to either process the loan or if you are buying a home, close
the
escrow. The longer the rate lock period, the higher the points or rate.
Typical lock periods are 15, 21, 30, 45, 60 and 90.
(7) OWNER OCCUPIED VS. INVESTMENT
PROPERTY.
Non-owner occupied loans are more expensive than owner occupied.
(8) IMPOUND ACCOUNTS - some lenders
will save up to ¼ point in loan fee, if
you establish an impound account with the lender to handle your tax and
insurance payments.
(9) CASH-OUT - If you are
refinancing and taking cash out, the lender may
charge a higher interest rate/points than if you were just refinancing
to
lower the interest rate.
(10) TYPE OF STRUCTURE - Single Family
Residence vs. Low Rise Condo
vs. High-Rise Condo. Residential 1-4 units vs. Commercial.
Condominiums are quoted higher rates than single family homes. There
are
two categories of condos (low-rise=less than 4 floors high, and
high-
rise=more than 4 stories high.
(11) US
Citizen or Green card holder vs.
non-permanent resident
Lenders have restrictions on LTV for non-permanent residents.
Factors that will make financing difficult
include liens on the property, or interest held by probate, or ownership by
multiple trusts.
We work with the most desirable
major lenders, and many niche lenders,
who specialize in helping people with special needs.
