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Understanding Mortgage Interest Rates

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The Federal Reserve Bank has been in the news quite a bit lately. Are they or aren’t they going to reduce rates? While this may have some economic effect, it has little to do with mortgage interest rates. A mortgage interest rate is the rate of interest charged on a home mortgage loan. In most cases, mortgage rates are based in large part on mortgage-backed securities.

Mortgage rates rise and fall and can drastically affect the homebuyer’s market and affordability. Factors that determine interest rate include credit score and home price, which are among the most significant influencers. Other factors include down payment, loan type and loan terms.

Fannie Mae and Freddie Mac play a major role in how rates rise and fall. After buying mortgages and compiling them into securities that behave like bonds, these large financial institutions then sell the mortgage-backed securities to investors. Ultimately, Fannie Mae and Freddie Mac seek to keep the money moving through the mortgage finance system.

Since mortgage interest rates have been on the decline, now might be the time to purchase a new home. If you are interested in buying a new home, please call me at 214-769-2947. I would love to help you! I work with great lenders who can help you lock into the best rates.

Beth Brake: Realtor-Team Lead

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