If you’ve been looking for the best mortgage interest rate over the past few weeks, you must have realized that finding the best rate is more difficult than before and that comparators are less effective.
When a loan is “insured”, banks can sell their claims in real estate investment funds. Without insurance, the cost of management for banks is higher and they have to assume more risk.
This is why you have mortgage interest rate spreads, depending on whether you have an FHA insured loan or not.
Mortgage interest rate comparators
Since the latest mortgage rule changes, mortgage interest rate comparators give you the best rate for a homebuyer for an FHA insured mortgage.
If you have a different situation, finding the best mortgage interest rate becomes more difficult.
Variable-rate mortgages and lines of credit depend on the Federal Reserve Bank “key rate”.
The bank decides multiple times a year whether or not to change the key rate. This rate is the rate the Federal Reserve Bank lends to banks.
The prime rate, which banks offer you, is based on the Federal Reserve Bank’s Prime Rate plus a mark-up.
Therefore, when the bank grants you financing on a variable rate, tell yourself that it will fluctuate according to the announcements of the Federal Reserve Bank.
Fixed-rate mortgages are different. Lenders use the US Government bonds to raise funds for fixed-rate mortgages.
Whether the rate is fixed or variable, the new mortgage financing rules mean that lenders now apply different rules and rates depending on whether the mortgage is insurable or not. If the mortgage is insurable, it qualifies for the best rates. The majority of buyers know that if their down payment is less than 20%, they need to pay for mortgage insurance that will protect the lender. Some lenders also choose to take out insurance on their regular mortgage portfolio themselves (down payment of more than 20%).
Why is a mortgage not insurable?
A property can be insured by FHA only at the time of purchase, this is not allowed for refinancing in other words.
In the second situation, if you want to amortize your financing over 30 years or qualify with the contract rate, then the loan cannot be insured.
Insured or insurable mortgage, what does that mean?
These mortgages are charged a premium rate, and some lenders no longer offer them at all. Also, a premium is often required if it is difficult to prove your income if you have a bad credit rating if the property is in a rural area if you want an extended rate guarantee or even the best mortgage rights. prepayment and transfer, or if you don’t want refinance restrictions.
Therefore, beware of the rates you see online as you may not qualify for them.
The distinction between insurable and uninsurable loans has undeniably made the mortgage environment even more confusing. Getting good advice is crucial, and the role of mortgage brokers in the home financing process has never been more important. You can get in touch with an experienced mortgage broker who has vast experience and knowledge to find the mortgage that’s best for you.