How Mortgage Rates are Determined
Rates are determined by the secondary market and other financial indicators. Mortgage rates can change daily and even during the same day.
The preferred way to evaluate rates is to examine the Annual Percentage Rate (APR). It indicates the effective rate of interest paid per year. The figure includes points and fees and other closing costs in addition to interest and spreads them over the life of the loan. Lenders are required to disclose the APR to you under the Federal Truth-in-Lending Act in order to help you. You may “lock-in” your mortgage rates at any time during the processing of your loan application up to five days prior to your closing date.
When you “lock in” your interest rate you are guaranteed that rate for an agreed upon length of time – typically 30 to 60 days. The benefit to locking in your rate is that even if interest rates should increase you will receive that locked rate. However, if you are locked in and rates decrease you will not get the benefit of the decrease in interest rates.
While the APR provides you with a common point for comparison, it’s important to look at the whole product before deciding which mortgage to get. The right product should answer these questions:
- How long do you plan to live in this home?
- What is your current financial picture?
- Do you want a fixed payment?
- How soon do you need to close?
Whatever your home financing needs, we are ready to help with a broad range of programs, money-saving options and personalized service.