The single most important factor that determines a buyers full borrowing capability is the mortgage interest rates. With mortgage rates as low as they are now for instance, a potential borrower can obtain a large loan with little money lost in interest payments. When the interest rates are higher it would cost the borrower more every month to borrow the same amount of money. The lower the interest rates the lower the payments will be. Markets of mortgage investors who bid for these mortgage loans, which are assets ultimately determine the mortgage rates. The rate that a bank charges mortgage lenders for loans is originated by the rate of profit the mortgage investors sold those assets to the banks. The secondary mortgage market forces the few mortgage investors who hold onto their assets for long periods due to supply and demand. Mortgage rates are also so low right now thanks to the Federal Government. The Feds have decided to lend billions of dollars to banks at near 0% interest rate in hopes of spurring banking. This has enabled banks to lower their interest rates across the boards in hopes of attracting new customers to re invigorate the loan industry. Another huge factor in determining mortgage rates is your personal financial situation. Part of the rate you get is figured out by judging how much of risk lending money to you is. Your credit history, down payment amount, amount of the loan, value of the home all contribute to your final quoted mortgage rate. The more of a credit risk you are, determined by your credit rating, the higher interest payment you will have to pay. The amount of foreclosures coming up though has a lot of people concerned that banks are going to tighten up their lending policies even more and in the process increase mortgage rates. Foreclosures especially in large numbers can easily increase mortgage loan costs. The banks are not making as much profit as they used to, and can not afford to lose money anywhere they can prevent it.

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