Mortgage Rate Guide

This, however, could further obviate the demand for mortgage loans. However, it is important to understand the nuances of the home mortgage loan before delving deeper into the issue. It is a housing loan that can be availed, in which a financial institution such as a bank or private company like Quicken Loans lends the borrower money who in return pays the lender interest. Among the many types of mortgage rates, the most popular are fixed rate mortgages and adjustable rate mortgages. As the names suggest, a fixed rate mortgage is one in which the mortgage rate remains the same and an adjustable rate mortgage is where the mortgage rate is subject to adjustments.
Mortgage rates or the interest rates for home loans are affected by a variety of factors. More often than not, they are influenced by supply and demand. A strong economy results in more borrowing which in turn results in higher interest rates. Conversely, with the softening of an economy, borrowing goes down and so does interest rates. The Federal Reserve can also influence interest rates through raising or lowering the discount rate which is the interest rate banks are charged when they borrow money from the Federal Reserve.

According to a recent survey released by Freddie Mac, the interest rates on the U.S. 30 year fixed rate mortgages dropped to 5.32% during the first week of July. Going from an average of 5.42% in the previous months and 6.35% the previous year, the significant drop in mortgage rates can prove to put in positive vibes to the housing market. The drop in the mortgage rates has consequently resulted in an 11% increase in mortgage applications and a significant increase in applications to purchase housing property in three months.

Mortgage rates, however, need to be at 5% or below to significantly boost the home loan demand. According to real estate soothsayers, in the next two quarters, mortgage rates are likely to average 5.35% before mounting to 5.28% roughly around the first quarter of next year and most likely hit the 5.5% mark in the following quarters of 2010.

Scott Anderson, a senior economist at Wells Fargo, says that home sales are "tantalizingly close" to stabilizing. "Sometime this summer I think we will see (them) bottoming out," he says. "It's really just a question of absorbing the supply of vacant properties," says Dana Johnson, the chief economist at Comerical Bank. "We are making headway, but we have some work to do." Home prices, however, are not likely to hit bottom until early 2010 and Anderson expects home prices to fall another 5 to 10% at the national level before stabilizing.

125% Home Equity Loans - Refinancing Your Home

Normally, home equity loans go up to 100%. It is often even much less, since many lenders are averse to risk. However, there are still some lenders that offer the possibility of getting a loan that covers 125% of the appraised value of your real estate property.

Such loans are not meant for first time buyers. First time buyers often just need a mortgage that covers a significant portion of the purchase price. However, if you already have a first mortgage on your home and need more credit, then your best option could be a 125% home equity loan as second mortgage.

Another option is when you buy a house that needs urgent renovation. You buy it, for example, for $200,000. You can finance this amount with a first time mortgage at prime rates. However, if you need to invest $50,000 (that extra 25%) for renovating it, what kind of loan should you take? A consumer loan has much higher interest rates than a 125% loan. The value of your home will also increase after you renovate it; therefore the debt will be much better protected.

The difference between a 125% home equity loan and other forms of credit is mainly the asset securing the loan. The credit line of a credit card doesn't have any other form of protection for the lender than your income. For lenders offering a credit card, what counts is your good standing. That means, if you have a good credit score and a reasonable income.

Lenders offering a 125% home equity loan, however, normally will check your assets, your income and your credit score. 125% home equity loans are protected halfway through your assets and halfway through your income, besides your wish to keep your credit rating as high as possible. Therefore, it is important that you check your credit score by yourself before applying for a 125% home equity loan (or any other type of loan), since it is possible that some mistakes have crept into it or some information is not up-to-date anymore.

If you need the 125% home equity loan, then you will need to go shopping. As said above, not all lenders offer it, since it means a higher risk than common mortgages. But the problems don't stop there. There is also a higher diversity in conditions and clauses of the loan and you will have to read carefully the small print.