My life revolves around a 30 day time period.  Why is this?  The normal length of a real estate contract is 30 days.  This is also the standard length of a locked interest rate.  Unlike a stock that someone buys and holds, the timing on buying an individual stock is not that important, because hopefully you can hold that stock for a long period and weather the ups and downs of the market.


A mortgage interest rate is different, and can be much more costly if you do not plan the lock correctly.  I have one shot to educate my clients on the market and execute a rate that fits their needs.  This can be hard during a volatile market where rates can change twice a day.  This can also be tricky because so many factors play into a client’s interest rate.  Many people do not know that an interest rate is basically a bond that is traded just like a stock.  The bond is called a Mortgage-Backed Security.  Large investment companies, insurance companies, and even other countries purchase Mortgage-Backed Securities.


Since it is a bond, it has a fixed payment to the investor.  Bonds are considered a low risk investment, so the return is not as big as a potential stock return.  So, often if the economy is doing poorly, the bond market is doing better because it is considered a safer bet.   This is the opposite from the stock market because a better economy drives up the price of a stock.  Many times the stock market and bond market run in different directions.  If the bond market is doing well and the price of a bond is increasing, that means that mortgage rates are decreasing.  This is always good for mortgage clients.


I always point out to potential clients that if you are talking with a lender, ask them how rates are determined and what the market is doing.  If they cannot explain this simple concept I mentioned above, I would run.  And run fast.

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