Last week, I implored my readers to turn the tables on loan officers everywhere by prequalifying them instead of the other way around.

The same way you wouldn't invest your money with a guy who couldn't read and interpret financial news, you shouldn't work with a loan officer who fails the same basic test.

The prequalifying question is an easy one:  "Where do mortgage rates come from?"

Unfortunately, the answer most loan officers give is the wrong one and that's terrible news for the borrowers that trust their home loans to them.

Mortgage rates do not come from the yield of the 10-year treasury note, as many people will confidently tell you.  Mortgage rates are determined by the price of mortgage bonds.  Nothing else.  That's it and that's all.

If your loan officer is saying something different, consider the impact that can have on your long- and short-term financial goals.

In my other recent post on the subject, I posted a snapshot showing how mortgage bonds were down in a trading session in which the 10-year treasury note was up.

On that day, mortgage rate shoppers watching the proper financial indicators locked their mortgage rates and got the benefit of lower rates.  Those watching the wrong ones (i.e. the 10-year treasury) watched pricing slip away.

That same divergence has occurred in three of the last five trading days, including today's(as shown in the graphic above).  The trend may continue, or it may not.  Either way, it's important that your loan officer knows how to read and interpret financial news to help you make the best mortgage choices possible.

Let's not forget -- it's your interest rate on the line.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.