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When you apply for a mortgage loan,
your inbox, answering machine, and mailbox may
fill up quickly with competing offers from
other mortgage companies. It’s not that
mortgage companies are selling or sharing
your information. Rather, it’s that creditors –
including mortgage companies – are taking
advantage of a federal law that allows them to
identify potential customers for the products
they offer, and then market to them. This isn't
necessarily a bad thing, from a consumer's
point of view.
The unsolicited calls, emails, and letters
from companies about competing offers often are
called “prescreened” or “pre-approved” offers
of credit. They are based on information in
your credit report that suggests you meet
criteria set by the creditors making the offers
– for example, you live in a certain zip code,
you have a certain number of credit cards, or
you have a certain credit score. Credit bureaus
and other consumer reporting companies sell
lists of consumers who meet the criteria to
insurance companies, lenders, and other
creditors -- including mortgage companies.
Mortgage
Companies Get the Goods
With every application for a mortgage
loan, the mortgage companies usually
get a copy of the borrower's credit
report. At that point, an “inquiry” appears on
your report showing that the mortgage
company has looked at it. The inquiry
indicates...
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Where to find mortgage interest rates? You
can find information about mortgage interest
rates from lenders or brokers, in newspapers,
or on the Internet. You can search on the term
“mortgage interest rate” and find a variety of
web sites that will give you estimates of
interest rates for various types of mortgages.
You can also search on some of the common
interest-rate indexes used for mortgages, such
as constant-maturity Treasury (CMT) securities,
and the Cost of Funds Index (COFI).
ARM Interest
Rates - The Index and the Margin
The interest rate on an ARM is made up of
two parts: the index and the margin. The index
is a measure of interest rates generally, and
the margin is an extra amount that the lender
adds. If the index rate moves up, so does your
interest rate in most circumstances, and you
will probably have to make higher monthly
payments. On the other hand, if the index rate
goes down, your monthly payment could go down.
Not all ARMs adjust downward, however--be sure
to read the information for the loan you are
considering.
Lenders base ARM rates on a variety of indexes.
Among the most common indexes are the rates on
1-year constant-maturity Treasury (CMT)
securities, the Cost of Funds Index (COFI), and
the London Interbank Offered Rate (LIBOR). A
few lenders use their own cost of funds as an
index rather than using other indexes. You
should ask...
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