Below are questions that the media or consumers might ask you regarding the mortgage market with suggested responses.  Consider how you can customize these points for your market.

Q. How are mortgage rates derived?

A. The rate for a fixed-rate mortgage is set for the loan's term - typically either 15 or 30 years.  Movement in fixed-rate mortgage rates are normally predicted on the rise and fall of the 10 or 30-year Treasury Note yield.

To understand mortgage rates, it is also helpful to look at the source of mortgage money.  Some of the funds loaned to consumers for mortgages originate from deposit accounts held by banks.  But in today's market, mortgages are increasingly funded based on sales of mortgage-backed securities.  The MBS is a financial markets product that packages together groups of mortgages held by a bank or other lender.  This package is then sold to investors.

In some cases, mortgage rates offered by lenders are based on what the financial markets are willing to pay for these securities - in which case, rates can change daily.  As the prices paid by investors for MBSs increase, mortgage rates can decrease.  In turn, as investors become concerned about the value of these packages securities, it may become more difficult for lenders to sell MBS products in the "secondary market."  In some markets around the U.S., this is leading to higher rates for consumers seeking mortgages.

Ultimately, it is not important for consumers to become experts in how mortgages are funded and why rates move as they do.  What is important is for consumers to take a realistic look at their credit and financial situation and to connect with one or more reputable lenders to discuss what amount of mortgage - at what rate - is feasible.  Real estate professionals - as part of a consumer's "team" of professional advisors - can help a client connect with lending professionals as well as help them make a realistic assessment about what they can afford.

Q. Do mortgage rates change by market?

A. Mortgage rates can vary on a local level.  To view current rates, consumers can visit www.bankrate.com.  Aside from regional rate differences, it is smart to conduct some quick analysis based on whether a consumer is looking at an ARM or a more predictable fixed-rate mortgage.

While rates can vary, mortgage money is essentially all from similar sources.  So if a consumer finds a rate online that is much better than what other local or national banks are offering, it is worth investigating further.  What looks too good to be true is often exactly that - too good to be true.  Smart lenders want consumers to be able to meet their loan payments and succeed in their home ownership.  But there are disreputable players in every industry - which is why doing your homework and working with a reputable bank or other type of lender is so important.

Q. Should you shop around for a mortgage?  If so, what are the pitfalls?

A. Here at Coldwell Banker Southern Homes, we encourage customers to shop around for a mortgage - speaking with two or three established, reputable lenders - as well as educating themselves on closing costs.  They should also remember that the rate for each type of mortgage is dynamic - it can change between 4:00 pm on Tuesday and 11:00 am on Wednesday.  when a consumer is pre-approved by a lender for a mortgage, they are often advised to choose a date to lock in the rate for 30 to 60-days.  This can be very helpful if rates look like they are on the rise.

When comparing the financial benefits of one lender versus another, customers should also take into consideration that particular lender's history of providing good service when processing a loan, as well as the company's overall reputation.

Q. Are there any tips regarding choosing a mortgage in the current economic environment?

A. Here at Coldwell Banker Southern Homes, we recommend that customers only take on a mortgage that they can reasonably afford.  Today, some sellers will not show their house to someone who is not pre-approved for a mortgage.  So it benefits prospective home buyers to run their credit check and work with a lender to see if they qualify for a mortgage - and at what level.  This helps people establish their affordable price range for a home.

Here are some tips we share with consumers:

• Do your research.  Ask for a Good Faith Estimate from the lender that documents up-front costs, including lender fees, closing costs, and monthly payments.
• If you are considering an ARM, factor in any future changes to the rate/payment.
• Only deal with a reputable lender with whom you feel comfortable. 
• Take time to understand your payment schedule.  Buying a home is the biggest financial investment you can make.  Do not leave the table until you are clear on the terms.
• Get a strong pre-approval from your lender after the company has reviewed your credit score and verified your income.  This way you can be realistic about what types of homes to consider that will fit your loan without pre-approval.

Q. We're hearing a lot about adjustable-rate mortgages versus the security of fixed rates.  What thoughts do you have on this topic?

A. The answer really depends on the consumer's personal situation and ability to handle an increased payment when the variable-rate mortgage inevitably increases.  For certain personal goals and situations, ARMs can be the right decision. 

However, ARMs typically involve greater risk.  Customers should keep in mind that they cannot be certain that they will have the opportunity to refinance to a more affordable rate, nor can they know exactly what level the rate will adjust to after the fixed period ends.  They also cannot be certain that they will find a buyer within the exact time frame they need, if they plan to sell before an ARM adjusts.  So here at Coldwell Banker Southern Homes, we still say that a fixed-rate approach to a mortgage is the safest bet for most people.

Q. When is it a good idea to chose a no-down payment mortgage?

A. It is rarely a good idea to choose a no-down payment mortgage.  Again, it might be right for some personal situations, but this is a risky bet for most people.  This type of lending has seen a significant constriction following the issues with the sub-prime market.

Q. What is considered a low interest rate today and how does that compare to five/ ten/ twenty years ago?

A. Right now interest rates remain quite low - less than half of the rates of the 1970s and 1980s, which approached or exceeded 15%.  People need to remember that the American Real Estate Market has been tremendously resilient over time.

Q. Are there special mortgages for first-time home buyers?

A. A number of state programs exist to help first-time homebuyers with mortgages.  One option is an FHA loan - a federal assistant mortgage loan which is insured by the FHA.  FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for private mortgage insurance or PMI, which reduces the risk for the lender.

All real estate is local.  In many markets around the U.S., right now is especially a good time to buy if you are a first-time home buyer - or living in a home that has appreciated and is worth more than when you first bought it. 

Q. What are the potential benefits of the economic stimulus package to home buyers?

A. In the spring of 2008, Congress approved legislation that raises the ceiling on the dollar amounts of the loans that the FHA can insure.  In the past, homebuyers who needed bigger loans typically applied for "jumbo loans" that carry a higher interest rate than standard "conforming" loans.  In raising the "conforming loan limit" from $362,790 to as high as $729,750 in some markets, more people will be able to buy homes at a lower interest rate.  The conforming loan limit is tied to the market area's median home price, which is set by the FHA.

According to the legislation, eligible loans must be made between July 1, 2007 and December 31, 2008, when the conforming loan limits will revert to existing levels unless Congress extends the cut-off date.  This legislation has been established for a temporary period of time to help stimulate the economy, creating in effect a strong call to action.