How are mortgage rates determined?
Mortgage rates are constantly changing and this makes it difficult when one is buying or refinancing a home. So how are mortgage rates determined? Learn this form the best texas cash out refinance at the moment.
There are really two pieces to mortgage rates. First, everyday there is a general market price for loans. This is how Wall Street or “the open market” prices mortgage backed-bonds. Secondly, there is how your local lender/mortgage broker takes the Wall Street open market rates and offers them to the public.
The purpose of this article is to discuss how your local lender or bank determines the rate for your specific home loan.
For talking purposes, let’s say today’s market price for a loan is 6.5%. And in order to get this 6.5% loan one must meet these 8 qualifications:
- The borrower must put 20% down
- Must have a 700 score
- Property must be owner-occupied.
- If the property is a condominium, the condo must have at least 50% owner-occupied tenets, not renters.
- The borrower must have 3 months savings in an account. (or have 3 month’s worth of payments in the bank)
- The borrower must document all their income with tax returns and/or w2.
- The borrower’s debt ratio (DTI or DR) but not exceed 45%.
- Finally, the borrower must have an escrow account so the bank, not the individual, pays the taxes and insurance.
If a borrower can meet all these guidelines then their rate would be 6.5% for … Read More