How Do Lenders Determine Home Mortgage Loan Interest Rates? [mortgageapproved.blogspot.com]
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Ever wondered how banks and mortgage lenders determine what interest rate they offer you? I did so I've done a little research I hope you find helpful. In some ways it's a simple method that makes sense when you look at it as a step by step process. Different lenders place emphasis on different factors so it does pay off to find a lender who finds your credit worthiness strengths important. If you do take the time to shop around you will greatly improve your chances of getting the best loan available. Some of the items on the list below are obvious but many people don't take the time to clean up their credit before they apply for a loan. Know that lenders will be checking these items about you as they decide on your rate, terms and loan details.
1) What do you make each year? As your income level rises in the eyes of the lender you become a less risking loan candidate.
This allows them to offer you a lower interest rate.2) What is your Credit score? Here's a no brainer. The higher your credit score, the lower the rate. A credit score of 720 or above is now considered a good score by lenders today.
3) What is your Debt to income ratio? Pay off as many of your credit cards, auto loans or other loans as you can. If you keep your other debt as low as possible lenders will see you as a good risk and reward you with a good interest rate on your home.
4) How much do you want to borrow? Here's one that doesn't seem fair but it is true for all lenders the more you borrow compared to the sales price, the higher your rate will be. Remember the old joke - lenders would rather loan money to people who don't need it.
5) How much will your down payment be? Obviously this has two affects on the cost of your loan.
First, the bigger the down payment, the lower the interest rate. Second, the less your loan amount, the less interest you will pay.6) How many years do you want the loan for? Basically the more years, the more interest the lender earns. Lender's love to offer 30 year fixed rate mortgage quotes. Why? 30 years of interest income!
7) What type of loan is it, fixed or adjustable rate? ARM's have become very popular because they offer a lower rate for an agreed on time but then they adjust annually so the lender has complete control of you monthly payments until you refinance.
8) What type of closing costs are included in the loan? Many types of mortgage loans include something called "points" this is basically a payment of one percent for each point made as a prepayment within your closing costs. Mortgages with points offer a lower interest rate throughout the term of the loan.
More How Do Lenders Determine Home Mortgage Loan Interest Rates? IssuesQuestion by oohhbother: Which was the economic meltdown cause: unqualified home buyers,lender malfeasance or bundled investment fraud? liar loans- loans without evidence of income - lender created flex rate loans with ballooning rates - lender created slicing unrated mortgages into bond-like securities and then giving them high ratings when sold - investment bank creation Liars loans were not new and did not go to subprime borrowers. They required financial evidence in other areas - such as property or wealth. Best answer for Which was the economic meltdown cause: unqualified home buyers,lender malfeasance or bundled investment fraud?:
Answer by Pundit
All of the them played a role in the meltdown plus others.
Answer by DAR
Interest rate manipulation by the Federal Reserve. Those things just channeled the location of the bubble.
Answer by Atypical Independent
The inability to accurately assess risk on everyones part.
Answer by gypsy
D. All of the above
Answer by PennyLeeD2
All of the above, plus a host of other reasons including regulatory malfeasance. Complex problems don't have singular roots.
Answer by GOZ2FAST
All three, but the worst culprit were the democrat leaders who FORCED the banks to make said loans under threat of penalty, audits and fines from the feds, making the huge mess we see now. Progressive ideas ALWAYS fail...you can't get something for nothing, or continue to just steal it from someone who has more than you do.
Answer by iceman
All the above and the most important reason is for our obsolete war economy. The war economy worked well from the end of WW2 to mid 1980's when it became obsolete. This bad economy can't be blamed on any pres. or the political parties, it's simply time to change our ways, and overhaul our economy.
Answer by Mrs. C
Giving loans to the unqualified was a liberal agenda. Part of the 'equality' based on color. Typical unsound business practices from the left who's real agenda is to gain power, rather than serve the best interest of the country.
Answer by Brian
Banks being forced by government regulation to loan to unqualified individuals was the primary cause. Bundling investments by lenders was an attempt not to lose their shirt on those deals..
Answer by robert c
All summed up in one word: deregulation.
Answer by Norm Deguere
All of the above.
Answer by KAS
I thought it was Bush's fault. That's what I keep hearing on the news.
