Welcome to Mortgage Rate Co.

The purpose of writing this blog is to eventually merge it with a website our team is developing. Throughout the course of this blog, which will be a constantly growing resource for pertinent up to date mortgage information, our team will put links to the Mortgage Rate Co. website where more detailed and specific information can be found.

Mortgage Rate Co. is a resource for any and all information regarding mortgages, rates, home loans, lenders, banks, borrowing, repaying a loan, loan amounts, the mortgage process, and of course consistent and friendly help with anything and everything you need. We pride ourselves on the high level of service and knowledge we bring to the table and would be more than willing to walk you through the necessary steps to finding you the right loan, lender, mortgage, and of course the best rate available. Our lenders' rates are updated regularly and we constantly add information to the Info Center so check there to expand your familiarity with the mortgage world.

In the current mortgage market and the financial credit crisis that has thrown our economy into turmoil we hope to help you achieve the best loan possible for your specific needs; whether that includes refinancing, a longer term mortgage, helping to rebuild your credit score to qualify for a lower rate lessening monthly mortgage payments, or just helping to get you started on the path to home ownership. We promise that through our vast network of mortgage information we can help. So don't hesitate to look around our site or contact us personally for some mortgage help.

If you are in any way remotely interested in a mortgage loan or just want to look around at the market and various aspects of it we hope you enjoy your visit to our site and we hope you will return to view the new material we constantly post about the realm of mortgage rates.

The Workings of Mortgages

Taking out a mortgage to finance the purchase of a home can be very confusing. There are lots of different types of loans to fit any financial situation, and to ensure you get the best one you must understand how mortgages work and which one you will be best with in the long rung.

The most traditional type of mortgage loan is called a fixed rate mortgage. A fixed rate mortgage is extremely defined from the start including a rate that stays constant through the duration of the loan, which makes every monthly payment exactly the same and thus predictable so you can plan financially around the mortgage payment. Along with a fixed rate the duration of the mortgage is also predetermined, usually for a length of fifteen to thirty years. These loans are nice because the payment does not change with rising or falling interest rates, and are easily managed as long as the amount of money borrowed is not too large in the first place. You can find more information about fixed rate mortgages in our Info Center.

The next type of mortgage we will discuss is known as an ARM, an adjustable rate mortgage. The difference between a fixed rate mortgage and an ARM is that as mortgage interest rates rise or fall in the country the rate associated with the ARM rises or falls as well. This can be beneficial or negative based on whether the rate at the time is rising or falling. When the rate of a loan becomes higher or lower the monthly payments adjust accordingly which can prove burdensome for people with less discretionary income. The problem comes that if an ARM rate becomes too high then it can be difficult to pay the monthly payment every month, subsequently causing people to default on their loans and loose their homes to foreclosure. If you are confident the rates in the market will stay low or not rise higher than you can afford an ARM could be great if the rates go lower.

Another type of mortgage for people with less than perfect credit is known as a sub prime mortgage. These are mortgage loans made to people who normally could not obtain a loan at the expense of a much higher interest rate. In order for lenders to take the chance on people who have previously had blemishes on their credit record they need to garnish a bigger reward for themselves in the end. Thus they charge a much higher interest to people with lower credit. Sub prime mortgage rates are largely based on what credit score the borrower has, as well as current financial situations.

The three other types of mortgages that are seen enough to be noted are Jumbo, Balloon, and Two-Step mortgages. These are just various twists on mortgages based on a person's financial situation and mortgage loan needs. A Jumbo loan happens when a person needs to borrow a larger amount of money than the limit on regular conforming loans set by Fannie Mae and Freddie Mac. The larger amount of money is borrowed usually at a higher interest rate. A Balloon loan is a loan that has a lower interest rate for the first couple of years than would normally be given to a person for the amount of the loan, but after the pre-decided period in which they receive a low rate they must pay off the principle or refinance. A Two-Step mortgage involves paying a fixed rate for a certain period of time, then readjusting the rate only once for the duration of the mortgage. All these types of mortgages are detailed more elsewhere in our learning center.

Basically these are the ways in which a person can finance the purchase of a house. They all have their ups and downs, some are better than others in various circumstances, but overall these are the typical ways in which mortgages are repaid in the current mortgage lending system.

What Is A Mortgage Rate?

A mortgage rate is what determines how much money the mortgage lender gets back overall for taking the risk of lending out a large amount of money. Rates often vary by loan type and amount of money, as well as personal credit score and current financial situation. Mortgage rates work by every year taking the percentage determined by the rate and then re-adding it to the loan total. So basically if you have a $100,000 loan, with a mortgage rate of 6%, the first year if no part of the loan was paid off, $6,000 would be added to the total. That is the most basic way to look at it. There are many different factors and variables that play into the amount of money added and total amount accrued but basically you can look at a mortgage rate as an amount added every year based on the value of the loan.

It is important to get a good mortgage rate in order to make lower monthly payments to easily be able to afford to repay the loan. Without shopping around and finding the most competitive rate a home buyer might potentially pay tens of thousands of dollars more by the end of the loan. In order to understand mortgage rates more, please use our mortgage info center to look at types of rates and how they apply to various loan types and amounts.

Mortgage Lenders - Banks and Brokers

To understand fully the system of obtaining a mortgage loan we must look at the two sources in which mortgage loans are originated. The two ways in which a perspective home buyer can borrow money come either from a bank, where naturally money is stored and doled out in a secure manner, or a mortgage broker, whom specialize in providing loans designed to use houses as collateral for the money being loaned. Both are viable options for people considering the purchase of a home, they both have positives and negatives which will be described below.

Taking out a mortgage loan from a bank for generations has been a great way to finance the purchase of your new house. Banks have large amounts of funds to dip into when you go to them seeking a home loan. They are regulated by the government and most likely can give you a lower interest rate on the money that you need to borrow. The problem with banks is that their intense network of financial transactions means that your mortgage to the bank is just another number on their balance sheets. Although smaller banks will provide a higher level of service than mega-banks, their commitment to you as a customer is relatively based solely on bills and payments. This can play a problem when a financial problem arises and you need highly knowledgeable and caring support to help you maintain the ability to repay the loan and keep your house. So although the rate might be lower the level of service most likely will also be lower.

Getting that same mortgage from a licensed mortgage broker has its own benefits and drawbacks. A mortgage broker needs to gain funds from investors or banks for each individual loan it writes. This means that the rate they can loan you the money at will be based on the rate at which they have the money loaned to them. Although the rates aren't too much higher, they probably will not be as low as if you originated the mortgage directly from the bank. The huge benefit that comes from taking out a mortgage with a licensed broker comes from the much higher level of service they will provide throughout the duration of the loan as well as the incentives they will give you in order to entice you to do business with them which often includes lower closing fees and no penalties for paying down the principle early. Also in a time of financial woes a mortgage broker would be much more willing to work with you as a customer in order to help you continue to repay the loan and interest on that loan. If you default on your loan it is much more of a burden to a mortgage broker because they need to repay the loans they took out to finance your loan. So basically a mortgage broker provides more service than a bank and is more willing to work with you in order to prevent foreclosure, but the interest rate on the loan will be slightly higher.

Overall both banks and brokers are good sources of mortgages, it really depends on your individual situation, financial security, and future plans. For example if you have a very secure job which pays well and have a decent nest egg to make sure if anything goes wrong you have a back up plan then using a bank to secure a mortgage loan would probably be the better decision. If you have some misgivings about your job security and don't have too much leeway with your savings then finding a mortgage broker to guide you through how much money you can borrow and how easily you can repay that loan would be a better idea. The best option always when making a huge financial decision such as purchasing a new home involves shopping around and learning as much as possible in order to make the most educated choice.

What is a mortgage?

A mortgage is a home loan. In order for an average person to be able to buy a house they will need a little help. To start the process of obtaining a mortgage a great place to start is by looking around for mortgage lenders. A mortgage lender will front the money an individual needs to buy a house on the condition that every month a payment is made in order to repay the loan. The loan's can come in various forms but usually they take 15 to 30 years to be fully repaid. After finding out some info on a few mortgage lenders a person must go back and forth between the best offers different lenders can make to find the best rate. The mortgage rate is the important part because it is a percentage of the total loan that you need to pay each month until the loan is paid off. The interest rate is the cost of borrowing the money. So if you shop around for a lower mortgage rate usually in the end you will have lower monthly payments and over the course of the loan pay less money to the mortgage lender.

The main reason mortgages exist involves the fact that people want to start building up their equity, which is the portion of the property you currently own due to paying off your debt. So basically you pay off the debt and you own more and more of the house. With a mortgage loan people can begin to own a home much sooner than if they had all the money to buy it in the beginning. They are an essential financial tool in our society as well as an asset and a value to individuals. If you’re looking for a home to live in, start a family, rent out to others for profit, or any other reason somebody might purchase a property a mortgage is the best way to achieve that goal.

Benefits and Drawbacks: Buying or Renting

When deciding whether or not to buy a home many things need to be considered. First of all the current situation of the perspective mortgage seeker must be taken into account. Where does the person live now and why do they wish to purchase a house? If you currently live in a place that does not cost a large amount each month then the monthly cost of the mortgage might be too strenuous on your finances. For example, a person recently graduating from college that still lives with their parents would probably find paying the monthly cost of a mortgage very difficult. Alternatively a person that has been paying a high amount each month for rent probably won’t be too disheartened writing a check to the mortgage lender every month.

Secondly, does the person have a current house they own with equity in it which will alleviate some of the amount of money they must pay for the house? If a person can sell their current home, pay off their current mortgage, and have a solid amount of money leftover to use for a larger down payment will make it much easier to buy another house. This extra money used for the down payment would reduce the amount of money needed to be dished out each month because usually mortgages are repaid in a system of monthly payments.

Thirdly, are you financially secure enough to afford the huge cost of purchasing a home and repaying the mortgage loan? A mortgage is a huge monetary commitment. If you are unsure of how long you will be sticking with your current employer or plan to relocate in the near future then buying a house would probably be a financial loss. The process takes a lot of money with all the costs associated with it and usually only becomes a beneficial investment after a couple of years paying down the mortgage and building equity in the house. So if you’re financial situation is somewhat shaky or you plan to move in the near future purchasing a house would not be as good of a decision as continuing to rent and avoiding the costs of obtaining a home loan.

In the long run buying a home can be a great investment and very sentimental. Everybody needs a place to live; to reside in with friends and family, and buying a home can provide a person with a wonderful feeling of accomplishment when they can finally call a place home. It also provides a higher incentive to maintain and invest in the property because that money will be returned when the house is sold. But in order for buying a home with a mortgage to be worth it the person must be willing to live in the home for a solid amount of time in order to avoid loosing money on the deal. Hopefully you can have the great experience of being a homeowner and being able to call somewhere a “place of your own”.

Introduction to Mortgage Rate Co.

Hello,

From henceforth I will be blogging everyday out of personal pleasure in order to help figure out this fiscal disaster called the Mortgage Crisis. Since late 2007 the mortgage industry has undergone a very tumultuous down swing due to bad lending practices and terrible risk assessment. Also the incentives for mortgage lenders at large mega-banks to write bad loans hasn't necessarily changed, and without reform of the system our population will quickly forget the troubles that occurred and in within a decade the same problem most likely will occur due to American greed.

The problem with the mortgage market isn't the original system that was established so people with the ability to repay a loan could buy a home younger and actual own the property so the money they put into builds equity and translates into personal wealth. Well with great rates and no regulation, the mortgage industry got soft and began writing massive amounts of loans to people that could not make payments, most often in cases where the homes were meant to be bought and then quickly sold at a profit. Well all the houses were overvalued and the people buying/selling the houses didn't have the ability to repay the loans, so when the house prices dropped because of the housing bubble bursting, lots of people had no way to repay loans. In the meantime all the companies writing loans bundled all the bad mortgages together into a financial derivative called CDOs or Collateralized Debt Obligations. When all the buyers/sellers defaulted on their loans the people who bought the "secure" CDOs lost billions of dollars, causing a huge cascading collapse of our financial system.

What will become of the mortgage industry next?

Current Mortgage Rates: 5%-7% for a 30 year fixed rate mortgage