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Health & Fitness

A Look Inside Mortgage Rates

Interest rates go up, interest rates go down. Lately we've seen more of the former. Once in a while, interest rates make news but rates are constantly changing with the bond market. 

The graph above is a "Japanese Candlestick" said to go back to the 1700's, and is watched all-day, everyday by yours truly. That's because it shows the best time to lock a home loan. Each candlestick represents a day in the market for mortgage backed securities. The higher the candle is on the graph, the the LOWER the rate will be. Another way to think of it is, the higher the candle is, the more money a mortgage lender will contribute to a loan transaction at any given interest rate, to cover a portion of entirety of closing costs and even setting up property tax and insurance impound accounts.

Why is it important? Some days, when the candlesticks are moving higher, our strategy is to float. That is, we hold off on locking, because as we float on up, lenders become willing to cover more and more of the loan's closing costs. When the candles are threatening a downward move, we lock ahead so our clients are protected against the deteriorating market. We get them out! 

The best part is that the candlestick is in real time, but the banks are reactive throughout the day. We are alerted, cell phones go crazy, if the market is moving in the wrong direction. Before banks have a chance to reduce their contribution toward closing costs, we lock loans and our clients are protected.

If you've worked with a lender, and you probably have, who didn't watch this like a hawk everyday, then you either worked with someone who wasn't interested in maximizing your savings, or a lender that is giving you an over-inflated, above-market padded interest rate (think retail banks that you walk into) that the market can move, and it would only reduce a small amount of the enormous profit they are making.

The mortgage market can change 1/2 of point or more in one day. Example, on a $600,000 loan, $3,000 of closing costs can either won or lost based on if your mortgage professional is paying attention. When Chairman Bernanke is doing a press conference on TV, it can swing even more dramatically. 

It matters with whom you work with, and if your interests are taken to heart.  Contact us anytime for information about a home loan. We love this stuff. http://www.HomeBenefit.com

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