How Interest Rates are Determined by Banks

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Interest rates change daily and sometimes even a couple of times during a day.

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Rates depend on:

(1) SUPPLY & DEMAND FOR MONEY
     Trying to Predict Interest Rates / Overview of Mortgage Industry 
     Economic Calendar / Ten Yr Bond / FOMC Calendar / Economy at a Glance)

     Historical Rate Charts:
       Prime Rate | 6 Month LIBOR | 1 Year LIBOR | 11th District Cost of Funds Index
       1 Year Treasury Rate (CMT) | 12 Month Treasury Average | More Indices

(2) LOAN PRODUCT - Fixed vs. ARM - Loan Programs

(3) LOAN SIZE - Total current debt on the property.
      Conforming Loans go up to $417,000,
      Jumbo Loans are defined as between $417,000 to $1,000,000, and
     Super Jumbo Loans is anything beyond $1,000,000.

(3) LOAN TO VALUE (LTV) - Total Debt secured by the property divided by a
     recent appraisal of the home. If your loan amount is more than 80% of the
     appraised value, the lender may charge you PMI (Private mortgage
     insurance). PMI protects the lender against a loss if a borrower defaults on
     the loan. To avoid PMI, you'll want to structure your 1st position loans to
     be not more than 80% of the appraised value. Some lenders also offer rate
     incentives at lower LTVs.

(4) CREDIT FICO SCORE (Improving Your Score)
      A higher score is better. A score of 720+ places an applicant in the best
     programs.  680-719 is next best category, followed by 620-679 and than
     500-619 (Worried about your credit).

(5) DEBT TO INCOME RATIO (DTI) - Total housing expense divided by gross
     monthly income. Determines whether you can go Full Documentation or
     have to submit your application with lesser documentation (Stated
      Income, No Ratio or No Doc).

(6) RATE LOCK PERIOD - Interest rates and points vary by the length of time
     needed to either process the loan or if you are buying a home, close the
     escrow. The longer the rate lock period, the higher the points or rate.
     Typical lock periods are 15, 21, 30, 45, 60 and 90.

(7) OWNER OCCUPIED VS. INVESTMENT PROPERTY.
     Non-owner occupied loans are more expensive than owner occupied.

(8) IMPOUND ACCOUNTS - some lenders will save up to ¼ point in loan fee, if
     you establish an impound account with the lender to handle your tax and
     insurance payments.

(9) CASH-OUT - If you are refinancing and taking cash out, the lender may
     charge a higher interest rate/points than if you were just refinancing to
     lower the interest rate.

(10) TYPE OF STRUCTURE - Single Family Residence vs. Low Rise Condo
        vs. High-Rise Condo.  Residential 1-4 units vs. Commercial.
       Condominiums are quoted higher rates than single family homes. There are
       two categories of condos (low-rise=less than 4 floors high, and high-
       rise=more than 4 stories high.

(11) US Citizen or Green card holder vs. non-permanent resident
       Lenders have restrictions on LTV for non-permanent residents.

Factors that will make financing difficult include liens on the property, or interest held by probate, or ownership by multiple trusts.

We work with the most desirable major lenders, and many niche lenders,
who specialize in helping people with special needs.