Mortgage Help   Mortgage Rates Real Estate Credit Foreclosure Tax Mortgage Rates Mortgage Basics Chapter 1: How much house can you afford? Homeownership Should You Buy or Rent Summary   Chapter 2: Adjustable-rate mortgages ARM and a fixed-rate mortgage Fixed-rate mortgages Understanding the key elements Which type of lender is right for you? Other types of mortgages Subprime Summary   Chapter 3: Your credit score Down Payment How lenders set rates Low down payments Mortgage insurance Your mortgage payment Mortgage Points Summary   Chapter 4: The good faith estimate Inspection and Insurance Necessary paperwork for a buyer Other lender paperwork Paperwork and fees Prequalification and preapproval Special circumstances Summary   Chapter 5: Ten questions to ask Turned down for a mortgage Underwriting What lenders ask Summary   Chapter 6:  Understanding the closing process Escrow Summary   Chapter 7: When your mortgage is sold Avoiding foreclosure Paying ahead Payment changes Refinancing Removing mortgage insurance Summary How lenders set rates Lenders don't actually set the mortgage interest rates on the mortgages they approve. While they do approve you for a mortgage and write the terms, the actual interest rate is basically determined by the secondary market. This is where mortgages are bought and sold. Fannie Mae and Freddie Mac are two of the largest and most influential mortgage investors. They were founded by the government several decades ago in order to make the lending process more efficient. They, and other investors, buy mortgages and either hold them in portfolios or bundle them into mortgage-backed securities. The securities are sold to Wall Street, mutual funds and other investors, who trade them the same way bonds are traded. The financial investors on the secondary market, not the mortgage lenders, determine the interest rate of your mortgage loan. Interest rates in the secondary market move up and down, much like the stock market. When the economy is up, investors demand higher yields and mortgage rates rise. When the market is down, rates tend to drop due to an increased investor demand. Interest rates move in a cycle, they go up and down. Many investors use the 10-year Treasury bonds as a barometer. When bonds go up, interest rates usually go up. In order to get the best mortgage rates, you will need to track the financial trends for a period of time and purchase your home according to the market.