Different Kinds of Interest Rates

• Commerical Debt (Commercial and Residential)

• Conforming (Residential Homes)

• Non-Conforming (Residential Homes)

Commercial Interest Rates: Commercial interest rates are usually based so many basis points above PRIME, LIBOR, or the Treasury indecies. It will geatly depend on the nature of the debt request and whether the investor is through a government sponsored entity or private banks and investment pools. It will also depend on the nature of the request, whether it is a bridge loan, short-term construction loan, long term loan on existing real estate, and who the guaranteeing party is along with their assets, cash flow, money into the project ("skin into the game"), and credit histories. Each project or loan request is case by case.

Conforming Home Loan Interest Rates: The interest rates reflected on the Today's Rates page are conforming market rates. These can change several times throughout the day. Generally speaking, conforming interest rates are lower (cheaper) than non-conforming interest rates. Fannie Mae and Freddie Mac purchase the majority of the conforming loans in the industry and which can provide for cheaper financing. Qualifying for the rates the correspond with the loan programs are generally more rigid and straight arrow. You either qualify, or you don't, so to speak.

Non-Conforming Home Loan Interest Rates: The other half of the industry is full of lenders who cater to needs of people that do not fit nicely into the guidelines of Fannie and Freddie. These investors on wall street buy in pools thousands of notes of homeowner's mortgages that meet a general fit. Their underwriting is more lenient and their commitments to buy are generally longer, making non-conforming interest rates more stable to not change higher or lower earlier than sometimes a whole month.

These interest rates, though based on the same index like the LIBOR, Treasury, and PRIME indices, have a higher lender margin added to them then Fannie or Freddie may, thus making them more expensive, and conversely more short-term.

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Home Loan Rate Locks

Lock your interest rate before its too late...

It is not advisable to consider watching the market in order to get a more favorable interest rate. If you are getting financing in the non-conforming arena it probably wont change soon enough to make the wait worth it. If you qualify for a conforming loan, waiting for the rates to go down will only leave you disappointed because of its unpredictability. It is always best to lock what ever the market it when you are ready to move forward.

For information on how to lock in your interest rate follow this link.

Rate Buy-Downs

Buying interest rates down is always a possibility. As a rule of thumb, with conforming rates it may cost as much as a full discount point (1% of the loan amount in cost) to go down just a .25% in rate (6.375% to 6.125%) which may only be $25 difference in your monthly payment.

With non-conforming rates it usually cost 1 point to buy the interest rate down by 30-50 basis points. Thus, it would cost 1% of the loan amount to buy the rate down from 7.00% to 6.50-6.70%.