Mortgage Financing
Giuseppe Battaglioli – Jan 15 2010
Why Interest Rates Change Daily
Interest rates change constantly, but it is important to know that rates are cyclical. If rates are currently at historical lows then we know there is a strong probability rates will go up again, and vice versa. Certain economic indicators such as unemployment data, consumer price index, retail sales data, and consumer confidence all have an effect on mortgage interest rates. But the key factor to watch is the relationship between stocks and bonds.
When the economy is slow and the stock market is “bearish,” many investors move money out of stocks and into bonds and mortgage-backed securities. This causes mortgage interest rates to go down. When the economy is doing well, the stock market rallies and is considered “bullish.” Investors then have a tendency to move their money out of that safe haven of bonds and mortgage-backed securities and back into stocks. As a result, mortgage interest rates go up.
Thank you Giuseppe Battaglioli
What Is Title Insurance?
Title insurance is a policy that is usually issued by a title company to protect the lender against something that might have happened in the past, rather than something that might occur in the future. In essence, an extensive search of public records is conducted by the title company to validate who has held title to the property in the past. The lender wants to know if there are any liens, judgments or easements on the property that they should be aware of.
But title insurance also guards against hidden risks or unknown factors that might cause an encumbrance at some point in the future, such as unknown heirs, forged deeds or wills, misinterpreted wills, false impersonation of the true owner of the property, deeds signed over by persons of unsound mind, or defects in the recording of past titles. Title insurance covers the cost of the title search, and any legal fees that may result from any dispute over past property ownership. It is required by the lender and paid for by the buyer.
The smart home buyer will also purchase title insurance to protect their own interests. This is a one-time premium that protects the buyer or their heirs, as long as they retain an interest in the property.(Special thanks to Dave Gallegos & Giuseppe Battaglioli)
Mortgage Interest Rates Myth
Mortgage interest rates are not set by the Federal Reserve and, contrary to popular belief, mortgage rates are not directly tied to the yields of US Treasury bills, bonds, or notes – including the 10-year Treasury Note. Mortgage interest rates are actually set by lending institutions, and are based solely on the performance of mortgage-backed securities. This graph shows that interest rates for 30-year fixed-rate mortgages are not tied to the yield for the 10-year Treasury Note nor the Fed Funds rate. (Special thanks to Dave Gallegos & Giuseppe Battaglioli, Capital Lending Group)
What causes fluctuations in interest rates?
We know that interest rates change constantly. If rates are currently at historical lows then we know there is a strong probability rates will go up again. Certain economic indicators such as unemployment data, consumer price index, retail sales data, and consumer confidence all have an effect on mortgage interest rates. But the key factor to watch is the relationship between stocks and bonds.
When the economy is slow and the stock market is “bearish,” many investors move money out of stocks and into bonds and mortgage-backed securities. This causes mortgage interest rates to go down. When the economy is doing well, the stock market rallies and is considered “bullish.” Investors then have a tendency to move their money out of that safe haven of bonds and mortgage-backed securities and back into stocks. As a result, mortgage interest rates go up. (Special thanks to Dave Gallegos & Giuseppe Battaglioli)