Where Do Mortgage Rates Come From, Anyway?
The Fed Doesn’t Change Mortgage Rates
It’s the question every parent dreads. “Mommy, how are mortgage rates made?”
Well, we’re going to tell you and the answer takes on special significance with the Federal Reserve meeting this week for its second of eight scheduled meetings for the year.
Mortgage rates come from Wall Street.
They’re based on the price of mortgage-backed securities, which are bonds bought and sold by corporations, individuals, and governments around the world, in the open market.
When demand for mortgage-backed bonds goes up, the rates you and I get from our lenders go down. And when demand for the bonds goes down, mortgage rates go up.
None of this happens because of the Federal Reserve.
The group doesn’t mandate rates, or suggest rates, or even decree what you lender should do with its pricing.
The Fed’s job is to use policy to maximize U.S. employment and to keep inflation in check. And, while those policies may influence mortgage rates, the Fed doesn’t set them directly.
Rates are set by your lender, based on activity that happens on Wall Street.
Today’s Mortgage Rates
Mortgage rates are up today ahead of the Federal Reserve’s meeting and that’s helpful for home buyers shopping for a mortgage, and for existing homeowners looking at a refinance.
Mortgage rates for conforming, FHA, jumbo, VA and USDA loans are lower right now across the board.
Your actual rate will depend on how much you’re borrowing, the state in which you live, and your history with handling credit.
Whether you do a full fee or a zero-closing cost loan will also affect your rate.
Loans with full closing costs tend to come with lower rates, and loans where closing costs are lender-paid tend to come with higher rates.
Shop your loan with two or more lenders to make sure you’re getting your best possible mortgage loan setup.
Lenders Think It’s Easy To Get Mortgage-Approved
It’s easier for home buyers to get approved for mortgages these days, the result of loosening mortgage guidelines, favorable rates for products, and stronger competition among U.S. lenders for your business.
But, you don’t have to take my word for it.
According to Fannie Mae’s Mortgage Lender Sentiment Survey published just last week, the lenders have said it themselves.
From the survey’s question of “Do you think it’s Easy or Difficult for consumers to get approved for a mortgage today?” 52 percent of mortgage lenders said it was easy for today’s mortgage applicants to get approved.
Fifty-two percent. More than half. It’s the highest percentage for that answer ever reported by Fannie Mae and it’s a signal to renters and other home buyers that you can’t know what’s out there for you with your mortgage until you go and look.
Lenders have gotten better at determining which loans are good for them and which ones are not and they’re straight up telling you to apply. So get out there and get your loan app started.
You miss 100% of the approvals you don’t apply for.
Get A Mortgage Rate Quote