Here are some of the questions we have received regarding rates on different loans. For more information and other questions please see our FAQs.
Q: Who determines mortgage rates?
A: Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off of the 10-year Treasury Note, which is incorrect.
While the 10-year Treasury Note has been known to rend in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.
Q: How often do mortgage rates change?
A: Mortgage rates may change throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.
Q: What causes mortgage rates to change?
A: Mortgage bonds are largely affected by various market forces that influence the changing demand for bonds within the market. Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and overall movement of money in and out of the markets.
Q: Do different programs have different interest rates?
A: Conventional, FHA, and VA loans can all carry different rates on a 30 year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults. Conventional mortgages are insured by private mortgage insurance companies, if insurance is required.
Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.
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