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My wife and I are planning to start looking for a house to buy. We’re in no hurry, and may not end up buying for another 6-12 months, but want to be ready if a good opportunity comes along, so we’ve started getting pre-qualified for a mortgage and finding a buyer’s agent. We’ve talked to a mortgage broker who was highly recommended by several friends. Last week, she quoted us a 30-year fixed rate of 6.375-6.5% and 0.5-1 points (for a conforming jumbo loan with 20% down). This was better than the rate quoted by the banks and credit unions we talked to, so we had her send us an application. Yesterday, we got the loan application and the rate is up to 6.75% and 1 point. She said that rates had gone up, but we’re not locked into a rate until we find a house to buy so this number isn’t going to be our interest rate. However, we realized we have no idea what causes mortgage interest rates to go up or down.

The fed has been lowering the funds rate over the last year, but that doesn’t seem to have corresponded to lower mortgage interest. They raised the cap on conforming loans, but again with little effect. Are there systematic factors that determine mortgage interest rates, e.g. the stock market, the bond market, dollar strength, etc.? Or is it just a matter of the banks being freaked out by the subprime/credit crisis and not wanting to loan money for housing regardless of the credit risk? We’d really to understand the underlying factors better so we can try to form educated guesses on whether current rates are inflated or a good deal.

Most fixed-rate debt is quoted as a spread to the funding cost, which is almost always LIBOR and changes due to a complex number of things, among them the money market (i.e., the fed funds rate). You also have to consider credit spreads, which can widen or narrow based on sentiment in the credit markets. Corporate credit spreads have actually be compressing lately, but I think the most recent RMBS data I saw suggested that while residential mortgage defaults were trending sideways, they weren’t exactly improving (I think I read that we’re actually at a historic high for the number of people upside down on their houses).

What are the benefits of payday loans?

The main purpose of a payday loan is to provide you with instant cash on a short term basis to cover any unforeseen expenses that you need to pay quickly before you receive your next pay check.

To apply for a payday loan you need to be currently employed with a steady income and you must have a bank account with a debit card. But if you meet these qualifications you can borrow up to $1,500 and use the money however you wish.

Most banks and other lending organizations often take a few weeks to approve a loan and send you the funds, but payday loans can be deposited into your bank account within 24 to 48 hours of receiving your initial application.

One major benefit of a payday loan is that it may be the only option for some people to get approved for a short term loan when they have a bad credit rating. Payday loan providers don’t check credit ratings so it can be a viable alternative.

Although payday loans bear a higher level of interest, they are one of the easiest ways to get hold of money fast when you need it most. By paying back your loan on time, you can also help to repair your credit rating.

Most payday loan providers need minimal paperwork and don’t require any documents to be faxed or posted. This makes the application process very simple and you will usually receive an instant decision and get approved within minutes.

With all that said, I can’t recommend you ever get a payday loan.  Find another way.

So here’s something I’ve been thinking about, and I just want to make sure I understand it right.

With a loan, you have your minimum monthly payment that you need to make, plus interest, until you’re paid up. If you can’t make the payments, then oh shit!

With a revolving line of credit with no time term, you make your minimum payment, but you can borrow that same amount the same month! Thus, you can hold onto the money forever, except that you’re accruing interest of course. Do I have this right?

Now don’t get me wrong, of course one shouldn’t plan on doing this, but it’s more of a consideration of what happens if you fall on hard times for a while, while you’re repaying. If it works like that, it seems like you would have to pay a higher interest for that luxury, but Wells Fargo’s site says that “Lines of credit have variable annual percentage rates that are generally lower than loan rates.” What gives? It just seems too good to be true, in a “something for nothing” sense, and I want to make sure I’m not misunderstanding, and that I’m not opening myself up for a chance to dig myself into a hole in the future.

You’re right about the line of credit being able to pay itself, but banks usually aren’t that stupid. Especially right now the bigger banks are looking out for this kind of crap and will just shut your line off. And that is pretty much negative compounding anyways, which is just painful.

If you really want to swing at this get a credit card with another bank and make all of your purchases on that card. Then use your line of credit to pay off the credit card each month going until you need to. This gives you a 20-50 day period on purchases where you are not paying interest on them. Also it makes it harder to see that you’re pretty much just floating yourself and the bank might have a harder time spotting it.

This is all really stupid to do, however. Credit isn’t free money and it isn’t too good to be true. At best you can float a few bucks for a few weeks if something major happens. I had my transmission blow and I couldn’t pay for it until I got my bonus two month later, but I managed to float it long enough to never pay a dime in finance charges.

If you want to make plans for future emergencies, save money and start making cuts to your spending now. Just think about things like this:

Ten years from now this one trip to Taco Bell will have cost me $90, do I really want to pay that much for a fucking taco?

And loans have higher rates because banks assume the risk that rates will rise. If you’re locked into 5% for ten years, and rates move to 10%, you’re making out quite well so the bank charges a premium when you create the loan. Lines of credit go up and down based on the prime rate, so if rates go up on prime, yours goes right along with it.