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A mortgage rate is the rate of interest rate you pay on money you either borrow to buy a home, or a rate you pay on a second mortgage, or home equity loan when you borrow money against your home. |
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A mortgage rate, when you purchase a home is determined by both economic conditions, and the type of loan program that you choose. |
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There are several benefits to having a better mortgage rate. The most obvious benefit is that a lower mortgage rate will result in a lower mortgage payment. |
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The factors driving the ebbs and flows of mortgage rates are largely unknown to the general population. You may be inclined to blame-or commend-your mortgage lender for the low or high rate she offers you; but in actuality, it's not her decision. Today, the true drivers of mortgage rates are the investors in the secondary market.
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Today's secondary market investors include government-chartered companies like Fannie Mae and Freddie Mac, plus insurance companies, pension funds, and securities dealers. Although Fannie Mae and Freddie Mac are different organizations, they participate in similar activities. Both can buy mortgages, and both can group mortgages together for resale in what's called mortgage-backed securities. These are highly liquid investments, meaning that they can be readily bought and sold.
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Entering 2008, the direction of interest rates remains unpredictable. Nobody has a crystal ball to tell which direction rates are headed. We can, however, determine whether or not such changes in interest rates are going to help the wallet of the average American homeowner |
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The act of closing on a mortgage yields a dizzying array of documents. A borrower is required to sign page upon page of legalese-often with little understanding of what's contained within the paperwork. As one couple discovered, not knowing what you're signing can have a profound impact on your mortgage rate.
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When people talk about America's monetary policy, they're referring to the actions taken by the Federal Reserve Bank that affect the availability and cost of money and credit. The Federal Reserve's job is to keep the economy on an even keel. To accomplish this, it works through subdivisions, one of which is the Federal Open Market Committee (FOMC). The FOMC regulates open market operations, which is the buying and selling of U.S. Treasury and federal agency securities. By buying securities, extra reserves are added to the banking system, so interest rates fall. By selling, reserves are lowered and interest rates rise.
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If you're applying for mortgage loans that are somewhat unconventional (like an interest-only or no-documentation loan), it's a good idea to plan ahead. By following a few key steps, you can improve your chances of getting approved, and save valuable time in the process.
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While this may be a great time for a home purchase, the climate is not ideal for mortgage rates. The boom in real estate has changed directions, and what was an unprecedented seller's market has quickly turned to the advantage of buyers. At the same time, consumers, accustomed to cheap mortgage loans, are searching more diligently for low mortgage quotes to help with their home purchase. |
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