Whenever I meet with a potential client, "What are your closing costs and interest rates?" is usually one of the first questions. It's a good question and one that I would answer even if it wasn't asked. The problem with this question is that it usually comes at the very beginning before I know anything about the individual, their credit scores, down payment, employment history, etc.
The fact of the matter is that interest rates and closing costs are going to be different for everybody depending on the individual characteristics of their loan application. Characteristics such as credit, the loan amount compared to the value of the home, and the type of loan program (e.g. FHA, conventional, etc.) will affect the interest rate and closing costs.
For example, somebody with a 740 credit score and 20% down payment might qualify for 4.875% on a 30 year fixed. Another borrower with a 720 credit score and only 10% down would qualify for 5.25% on a 30 year fixed. Or they could choose 4.875% but it might cost them an extra 1.5% of closing costs.
The other caveat that many borrowers don't realize is that they have a choice of whether they want to pay more closing costs to get a lower rate or less closing costs and take a higher rate. For somebody that is going to be in their home for 30 years and make regular mortgage payments it makes more sense to get as low an interest rate as possible regardless of the closing costs. It's also true that a borrower who will only be in their home for 2 years should take a higher rate and pay less closing costs.
So if the next time you ask "what are your closing costs and interest rates?" don't be surprised if I respond, "What interest rate do you want?", because the fact is that you have a choice.
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