The Not So Simple Task of Quoting Interest Rates
I liken Interest Rates to onions in more than a couple of ways. Much like onions, Interest Rates have "layers". In today's mortgage financing, a Mortgage Lender must weigh all the facts and peel away "layers" of information and data to find and reveal the answers to your Interest Rate questions.
And right now with Interest Rates being at historic lows (but rising at the time of this writing), the more you can peel away and sift through those layers of data and information, the better Interest Rate you can get. Interest Rates so low that they could make you cry, just like an onion does. Simply ask anyone that paid Interest Rates in the "teens" (or above) back in the mid-80's if the thought of receiving a 4% or lower Interest Rate today doesn't about make them cry! Tip: Be ready with a hankie ...
Interest Rates are a big deal to everyone considering the purchase of a home or thinking about refinancing. Rightfully so. All want to know, "What actually goes into determining the final Interest Rate I will receive?"
When speaking to my clients, most are aware that their credit and debt ... their FICO scores ... play a big part in what Interest Rate they'll receive on their mortgage. But many do not know that there are many more pieces of info and data that also contribute to the final outcome. (Especially true, if a first-time home buyer.)
What are some of those other factors that I (as your Mortgage Lender) will use to determine your Interest Rate? They can include:
- What type of property occupancy is involved? Will it be your Primary Residence? 2nd Home? Investment Property?
- What is the property type? Is it a Single-Family Residence? Attached? Condominium? PUD? ()
- As a result of the above question: How Many units are involved in the financing? 1-4? More?
- What is the property's location? State, County, City?
- What type of loan are you seeking? FHA? VA? Conventional? USDA-RD? Etc ...
- Will you be paying Discount Points? (Fees paid at Closing, in order to obtain a lower interest rate)
- What type of Transaction do you seek? Purchase? Refinance? (Rate/Term Refi? HARP Refi (for Underwater Properties)? Cash-Out (Loan above Balance), other) ?
- What amount of Reserves do you have? (Months of Savings available for emergencies)
- What are your Credit Scores? It is the MIDDLE Score that determines eligibility and loan approval. If you are borrowing with a spouse/partner(s) ... once again, it is the lower (lowest) Middle Score of all involved, that determines eligibility.
- What is your Debt-to-Income ratio? Meaning ratios of payments you make VS Gross Monthly Income.
- Loan-to-Value: What kind of down payment are you making? 3.5%? 5%? 10%? 20%? It CAN be reflected in the Interest Rate you receive.
- If you are Refinancing, what is the amount of Equity in your home? The Interest Rate you receive reflects the amount of Equity (expressed in terms known as Loan to Value, or LTV).
- Are there other factors contributing to your financial status? If so, they are considered on a case-by-case basis.
And, as though all of that isn't enough, let's add a bit of drama into this mix. As the old saying goes, "timing is everything", so your Mortgage Lender now must strategically "" an Interest Rate. Like gas prices and yo-yos ... Interest Rates go up and down. Because of this, "locking-in" and securing the most advantageous Interest Rate for a client becomes much like taking aim at a moving target. Time to work with an expert, experienced marksman, for sure.
I mean, just take a gander at all those determining factors I mention and list above. Does it become more easy to understand WHY ... what seems on the surface to be a very simple question ... is in reality, NOT at all easy for a Mortgage Lender to answer?
The NOT so simple task of quoting Interest Rates. If you are dreaming of buying a home in the future, get started now! Allow yourself ample time to thoroughly prepare for your mortgage financing. Allow yourself ... and your Mortgage Lender ... plenty of time for fact-finding and questions. Truth is, it will take time to accomplish everything YOU need to do ... and all that needs to be done on your behalf.
It takes time and proper "timing" to seek and discover the most advantageous mortgage program and Interest Rates available to you.
Please keep in mind too ... If YOU, or your clients, are in need of mortgage service and an Interest Rate quote ... it's absolutely the best time to work with an experienced, knowledgeable mortgage lending professional. A successful outcome for your transaction depends on it ...
* Hoping to buy or refinance a home in Will County, Chicagoland, or elsewhere across the country? Contact me today! I'll put my 35+ years of mortgage experience and expertise to work on YOUR behalf.
I can be found at any of the following: