See: Mortgage.
You apply for a mortgage. The bank sticks all your pertinent information (credit score, current bank account balances, shoe size, dating history) into their algorithm. It spits out your mortgage par rate. This figure represents the general rate you qualify for.
Think of "par" in the golf sense. If you’re a regular golfer (regular professional, quality golfer, that is...our annual employee golf outings here at Shmoop are known as "Bogey Fest," or really, "Quad Fest" if we're being real), the par score represents what you should be able to shoot on that hole. Par four means you should get in the hole in four strokes, etc.
In a similar way, the mortgage par rate represents the interest rate someone of your credit quality should pay, based on current market rates. It isn’t necessarily the rate you’ll pay, however. The figure provides the benchmark used to calculate your final rate. The bank might still raise or lower the rate based on the situation...leading to the adjusted par rate.
See: Adjustable-Rate Mortgage (ARM).
Related or Semi-related Video
Finance: What is a Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
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