Mortgage Loan Rates are determined by the supply and demand of money to lending banks from the Central Government.
The Federal Reserve changes the cost of money to try to minimize the effects of inflation. Other external forces change the cost of money to the large lending banks- such as effects of increasing or stalling economy, Gross Domestic Product changes, value of the U.S. dollars versus other economies, etc.
The rates that are offered by lending banks are kept in check by the fact that all of the banks have to spend the same amount for that money, this money in turn is lent to home-buyers or home financers. The competitive market keeps the rates relatively the same among all lenders who have a common product (30-year fixed mortgages, 5/1 ARMS, 7/1 Interest only ARMs). A mortgage broker will have 30-100 different banks vying for their business on some products and the mortgage broker will pick the best bank for a borrower’s situation. The bank with the best rate will get the business and the loan.
The rule of thumb for paying points is that if you know that you are going to be in a loan situation for 3 and ½ years, you should pay 1 point. The cost of the point, 1% of the loan amount, will be paid for in the 3 and ½ years. You would pay 2 points to lower you rate if you will stay in that loan situation for 5 and ½ years.
This is a rule of thumb and small loans or large loans do not correlate exactly.
The typical legal, lending and filing fees are fairly standard state to state. There may be an application fee or broker fee that is charged by the broker. These are usually avoidable and it is worthwhile to ask a broker if they can waive this fee.
All of this information will show up on a Good Faith Estimate of closing costs and the exact figures will show up on the HUD Settlement Sheet.
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