When people want to buy something now, but don’t have (or don’t wish to spend) the cash to buy it outright, they can instead use a loan (aka financing, borrowing, debt). This typically involves an agreement between the consumer and ...
Key Concepts
Mortgage rates are interest rates on home loans
There are really TWO mortgage rates: the interest rate (or “note rate”) applied to your loan amount (or “principal”) and the rate implied by certain upfron...
Key Concepts
APR attempts to factor in upfront costs to deliver a true “cost of financing” which is typically higher than the interest rate on your mortgage
APR relies on human input and variables that can be manipulated to a ce...
Key Concepts
Mortgage rates are driven by investor demand
Investors view mortgages as similar to bonds (lower risk, more stable return)
Unpredictable consumer behavior makes mortgages more risky than “guaranteed” bonds like U...
Mortgage rates change daily , and sometimes multiple times per day. In this article, “mortgage rates” will refer to the combination of upfront cost and actual interest rate described here: The 2 Components of Mortgage Rates . For example...
At some point during the mortgage process, the contract interest rate (the one that ends up on the Promissory Note--the most official document stipulating the terms of repayment) must be “locked.” This means that there is an agreement bet...
Key Concepts
Understanding securitization (mortgages turn into bonds)
Securitization makes rates lower and allows them to follow other bonds more closely
There are a few ways investors could address the unpredictability problem associ...
Key Concepts: Understand how investors, lenders, and borrowers come together to determine the final mortgage rate
This is it! Like the first time you fully grasped the “Bill on Capitol Hill” song, this section will hopefully help you ...
There's a common misconception that the Fed "sets" (or hikes/cuts) mortgage rates directly. Even among people who know better, there is often a belief that changes in the Fed Funds Rate (the thing the Fed actually hikes/cuts) translate in some ...
Why Mortgage Rates Move in Jumps, Not Smooth Lines
Mortgage rates often “jump” as they approach certain cutoffs. The reason isn’t just daily moves in Treasuries. It’s how mortgages get bundled and sold as mortgage-backed s...
Mortgage rates, for the purposes of this article, will refer to the most commonly-quoted loans available through the most prevalent channels. That essentially means conforming, fixed rate loans —especially 30yr and 15yr fixed.&...
Many mortgage industry professionals and a vast majority of consumers are not familiar with Mortgage-Backed Securities (MBS), let alone the critical role they play in mortgage rate movements. Those with a basic understanding of that relations...
Key Concepts
Understanding securitization (mortgages turn into bonds)
Securitization makes rates lower and allows them to follow other bonds more closely
There are a few ways investors could address the unpredictability problem associ...
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