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Factors that Influence Mortgage Rates

Factors That Influence Mortgage Rates

Timing the market for the best possible opportunity to lock a mortgage rate on a new loan is certainly a challenge, even for the professionals.

While there are several generic interest rate trend indicators online, the difference between what’s advertised and actually attainable can be influenced at any given moment by at least 50 different variables in the market, and with each individual loan approval scenario.

Outside of the borrower’s control, the mortgage rate marketplace is a dynamic, volatile, living and breathing animal.

Lenders set their rates every day based on the market activities of Mortgage Bonds, also know as Mortgage Backed Securities (MBS).

On volatile days, a lender might adjust their pricing anywhere from one to five times, depending on what’s taking place in the market.

Inflation, The Federal Reserve, Unemployment, Gross Domestic Product and Geopolitics are a few of the items you can pay attention to if you’re trying to track rates for a 30 day lock.

Factors that effect interest rates on a individual loan basis are called loan level pricing adjustments or LLPAs.  Some of the more common LLPAs are:

  • FICO Score
  • Down payment or Equity if a refinance
  • Purpose of the Loan (purchase, refinance, cash out refinance)
  • Property type (Single Family, 2 units, 3-4 units, condominium)
  • Occupancy (owner occupied, second home, investment property)
  • Type of Loan (Conventional, FHA/VA, USDA or Jumbo)
  • Are taxes & insurance escrowed or non-escrowed?