Mortgage Rate Variables – What Are They, and How Can I Adjust?  

Texas mortgage rates change daily, and sometimes even hourly. Generally, changes are small; usually there is only a slight change up or down in a given day. However, on eventful days, a 0.25% net change isn’t too far fetched.

In the past few years, interest rates were artificially reduced by misleading economic indicators, including the false demand for mortgage backed securities (MBS’s). The Federal Reserve had been buying the MBS’s at auction, as opposed to outside sources investing in our economy, to help shorten the bank and housing crisis. The Federal Reserve ceased their purchasing in Spring 2010 leaving the economy to adjust naturally in response to the usual factors.

This explains why many were indicating this was the best time to buy a home due to record low interest rates for mortgages.

The interest rate you get when you close on a mortgage is the result of the market adjusting in two areas: (1) the overall economic picture which sets the range of available interest rates and (2) your personalized financial picture which determines where in that range you qualify.

Some of the deciding factors of the overall economic picture that set the range of available interest rates are:

> supply and demand of specific bonds

> stability or volatility of international economies

> the stock market

> housing sales and average number of days on market to sell

> tax incentives and credits that will impact the demand for new mortgages

> housing reports showing increased or decreased new construction

> unemployment numbers

Each person’s individual financial position determines where in that range you qualify.

For a mortgage, we will look at your financial position at the moment you complete your application. This is made up of several key factors. Just a few of them are:

> credit score and history

> income

> revolving and installment debt

> income taxes and deductions

> liquid assets and asset activity

> the value of the home

> the loan amount

> the term and the type of loan you are applying for

> the amount of equity or down payment on the home you are financing

If any market factors affecting interest rates are facing uncertainty at a given time, it will likely cause rates to rise. This uncertainty is considered “risk”. Interest rates can be explained as nothing more than risk evaluators. A good rule of thumb is that the higher the risk for a given situation, the higher the interest rate. Just the same, if the scenario is less risky, the interest rate will be lower.

In today’s market, there is a lot of risk due to high unemployment numbers, the housing market, uncertainty in Greece and Europe, demand for mortgage backed securities, the expiration of tax incentives on purchases, and tightened qualifying characteristics for individual clients like you.

Because the interest rates have been artificially reduced, we can make a safe assumption that rates will now go up. With a strong individual financial position, you will always qualify for the lowest rates in the available range. A quick study of any chart showing mortgage interest rates over the past 30 years shows that rates can’t do anything but go up. It has become habitual to wait for rates to go down, and we are finally at a low enough point where it will soon become habitual to watch the rates climb.

Therefore, it is harder for some, but not all, people to lock in at a lower rate. That’s why it is imperative to consult with a mortgage banker to determine your ‘risk factor’, and to watch 203k loan texas mortgage rates closely. This way you can lock in at the lowest possible interest rate before it goes back up.