Qualifying for a Home Mortgage Loan

This is a phenomenon that very often confuses just about everyone, including but limited to Loan Officers.

A cut in the Federal Funds Rate hits the news really fast and those who are in the process of obtaining a mortgage loan call their loan officers to see if their rate is going to be better only to be disappointed by the news that in fact mortgage rates have inched up!

The explanation is the fact that a lower Fed Fund Rate will help businesses in general and large publicly traded companies in particular and as such investors rush to invest in the stock market and withdraw funds from the bond market pushing bond prices down and their yields higher.

Home mortgages are financed in by selling bonds and when bonds drop their yields rise pushing mortgage rates higher. The closest number to follow in your favorite news program to gauge what's happening to mortgage rates is the 10 year Treasury Bill. There are of course 2 year, 5 year and 30 year treasury bills and it may seem logical that a 30year mortgage will follow the 30 year T Bill but the reality is that the 10 year yield is the closest one.

As always we strongly recommend that you visit the Free Mortgage Calculator site and carefully work out what the consequences of taking the mortgage that you are offered. A few minutes of careful consideration will save a bundle of hurt later.

Mortgage Articles

Fed Rate Lowered, Mortgage Rates Rise!