Lock My Rate – Why can’t I get that rate?
All Mortgages are NOT created equal, and there are countless factors that can impact your rate. The rate you see in the newspaper, or on the Internet more than likely doesn’t apply to you.
What factors can effect the rate you get? Here are some of the more common items: Your down payment, your credit score (even someone with a 720 credit score today could pay more), the type of home (single family, multi-family, condo, etc.), the purpose of your loan (purchase, refinance, cash-out), the total level of indebtedness (do you have a second mortgage), how long you need the lock to be good for (30 days is normal, but a 45, 60, 90 or greater lock adds to the cost), the total amount of your loan (smaller loans will likely cost more), is your lender collecting your taxes and insurance each month, are you going to live in the property or not (obviously on investment properties the rate is higher), are you looking at a 30 year, 15 year, 20 year loan, is the loan a normal amortizing loan or interest only, fixed rate or adjustable?
In today’s market if your credit has not been pulled it is not possible to give a definitive rate. Anyone with a score below 740 will pay some form of an increase. It might seem crazy, but Freddie and Fannie both have surcharges for scores below 740.
A rate is good the moment it is said, and in writing. A rate from last Tuesday can not be compared with a rate from today, or even earlier today. It is common to see rates changing several times a day right now. You must compare rates on one day. You need not shop 20 people to find the best rate it will only serve to cost you time and frustration as you try and compare 20 offers. Think about this, a 1/8th difference in rate will change your payment about $10 for every $100,000 of your loan amount. Is making yourself crazy worth $10?
A word of advice. Don’t shop rate until you have a property. Again, don’t shop rate until you have a property. You are only asking to get lied to. Think about this. Who are you going to call back when it is time to lock? The broker with the lowest rate originally right? Brokers know this and quote accordingly. They know that they don’t need to live up to that price, and you will only call the lowest rate back. Talk with the brokers and find someone you trust, and connect with. Talk loan options with them. Ask them what drives mortgage rates (if they say the “t-bill” RUN for the hills). Ask them are their events coming in the near future that will drive rates up or down? A good broker will know that rates are based on Mortgage Backed Securities, and they subscribe to a service who can keep them informed with where prices are and events coming which will drive prices. After all a price “to good to be true” when rates are dropping will be much higher than you could have gotten if you waited. Just like a rate that is “to good to be true” could be way out of line when you find out it wasn’t true and you have to lock at the real rates after they increased.
