Many mortgage shoppers want to know two things:  how much are fees and what is the rate?  While both are important questions, answers to these questions given by mortgage professionals who don’t know your unique situation are rarely reliable.

Every true mortgage professional knows that it is impossible to quote an interest rate and loan terms to a borrower of whom little is known.  At best, any offered information is a guess.

So, if you call a mortgage company and demand a rate quote before divulging any information about your current situation, please understand that the best you are getting is a generic rate for some loan program that you may or may not qualify for (of which there are literally thousands).  And, when it comes time to lock in your interest rate and loan program don’t be surprised if your options differ from what you were originally quoted.

In order to provide a more accurate quote to your unique situation, a mortgage professional would need to first know about your employment, income, credit history, and financial situation.  Other things like your property type and intentions can also play a factor in what terms you can expect.

The moral of this post is that an wise borrower will find it in their best interests to fully inform their loan officer, so that more accurate financing options can be given to the borrower to make an informed decision.  Without a clear picture of the borrower’s unique situation, various rate quotes by competing mortgage brokers will mean very little when it comes time to close on the loan.

Interest rate movements are about as well understood as some of the decisions made by Utah Jazz management.  Most of us can only scratch our heads and wonder why things happen the way they do.  However, that doesn’t mean a quick analysis of change won’t yield some beneficial insight.

What do higher interest rates mean to you?  The question obviously has many follow-up questions that must be answered before any true analysis can take place.

Are you currently looking to buy a home (but without a locked-rate)?

If you own a home, is your mortgage fixed or variable?  Are your payments going to increase in the next three to six months?

Are you planning on selling your home and buying or building a new one?

In an attempt to provide information that is useful in answering each question and similar variants, I want to outline my thoughts sort of like painting a broad picture from which inferences can be taken.

So first of all, higher interest rates immediately translate into higher monthly payments when all else is equal.  Pretty basic – something everybody knows.   However, all else is usually not equal.  If you’re on a variable interest rate, your payments may not adjust for several months, or perhaps they won’t adjust for a couple of years.  You would be wise to find out when your payment might adjust and what it will likely be adjusting to.  You can find out by calling the lender where you send your monthly payments or by visiting their website (in most cases).

If you’re shopping for a home, you might want to lock-in your interest rate soon and avoid any additional upward movements in the rate.  A small move upward can dramatically affect your maximum loan amount, which is dependent on your debt-to-income ratio.  Higher payments mean a higher debt-to-income ratio, which means less purchasing power for you.

Less purchasing power brings us to the point I wish to make next.  It is possible, though it’s only happened once or twice in America’s history, that real estate median prices could fall if interest rates spike up and are sustained for a couple of years or more.  Falling home values can have a major impact on you if you need to refinance out of an adjustable rate mortgage into a fixed rate mortgage or if you need to consolidate some debt.  You’re able to do less when you have less equity in your house.

While it’s fairly reasonable to say that nobody knows when interest rates are going to go up or down or what they’ll do next, it is possible to have a plan of attack once they do make a move.  Right now rates are on the rise and if you’re smart you’ll assess your mortgage situation and act accordingly.