Mortgage Rates: How Are They Figured Anyway?

The warm days of spring have finally arrived. On top of the cookouts, sunscreen, and soccer games, prime season for house hunting is now underway. But before you spend Sunday afternoon scouting out open houses, it’s important to understand the ins and outs of a mortgage. 

Whether you’re a first-time buyer or thinking about refinancing, the first step is to meet with a mortgage expert who can help navigate the process. And in most cases, face time is better than screen time.

“I recently advised a client to pay off some higher-rate, high-payment credit cards as opposed to putting down a large down payment,” says Pat Quigley, Senior Vice President and Sales Manager for Town and Country Banc Mortgage Services. “This made their monthly budget more comfortable and allowed them to get the home they wanted. Many online lenders will not go through that process. They simply look at the figures and determine yes or no.”

While national average mortgage rates are widely circulated, the actual rate you lock into could be different. Here’s how a typical mortgage rate is figured:

• It starts with questions. Lenders need to learn more about each client’s situation to narrow down the best loan options available, according to Quigley. Each loan has specific guidelines and various government grants are available for those who qualify.
• The national mortgage rate is based on what the bond market is doing at that specific time. Currently, it’s hovering around 4.625 percent for a 30-year fixed rate. Quigley recommends thinking of it as a base price on a vehicle. Adjustments are made based on an individual’s credit score, debt-to-income ratio, and the amount put down. A higher credit score will secure a lower interest rate.
• When you choose to close also factors into the rate. Most mortgages are backed by secondary markets like Fannie Mae or government banks. This allows commercial banks to continue to provide home loans without running out of funding. Secondary markets are backed by investors who issue different rates for the 30-60-90-day timeline based on market fluctuation.

The home-buying process is detailed, but it should also be fun. Every family has questions and each situation is different. That’s why partnering with the right lender can make a big difference for your family. 

“Most of the mortgage lenders at Town and Country have more than ten years lending experience,” says Quigley. “We know all the options and resources to best help our clients; it’s what we do every day. A financially secure home lays the foundation for a happy home.  And that’s what we want for our clients.”

Town and Country Banc Mortgage Services is based in Springfield but also has mortgage lenders in Decatur, Edwardsville, Quincy, Jacksonville and Venice, Florida. As a leader in the market, the team can help purchase or refinance a home anywhere. For more information, visit TownandCountryBank.com or call 1-866-787-3100.