Interest Rates - What kind of rate do you have for me?
Mortgage interest rates can be very complex. It's a question that is harder to answer today more than ever before. There are just to many variables that can go into a specific interest rate. Yes, you will still see many advertisements on the tv, on the internet, on Facebook, or hear them on the radio that give out low interest rates. How many times do you see the fine print appear and last for only seconds. This is where some of your detailed information is located for that specific mortgage rate being mentioned.
Why do you see low interest rates that usually seem to good to be true? Within that fine print, you will usually see such terms as : 80% LTV, credit score 720+, and a specific loan amount. This is not the norm and most borrowers don't have this kind of combination. This is where you need a true mortgage professional that will ask you the right questions, educate you on the different types of mortgage programs, the different interest rates, and help explain the whole process properly. There are just to many call centers with loan officers that just give you what you think you want and it could end up costing you more in the long run.
Questions that a good loan officer should be asking you, the borrower :
1. What type of monthly payment would you feel comfortable with, and not to exceed. (this is to include property taxes and homeowners insurance)
2. Your goals - Goals for the next 3 years, 5 years, and 10 years. This is extremely important for several reasons. (to include kids & schooling)
What variables can go into an interest rate?
1. Just the difference between a FHA loan and a conventional loan can be huge, because of the major pricing adjustments on a conventional loan depending on LTV (loan to value) and or credit scores.
2. Credit scores & loan-to-values (LTV) - as mentioned above
3. Backend DTI (debt-to-income) Ratios - With some loan products, if you go over 50% or 55%, there can be pricing adjustments.
4. Escrow waivers & condo loans - This would be on conventional loans only.
5. Lock-In Period - A biggie... So many people quote 30 day locks, yet so many lenders are taking 45 to 60 days to close a loan. In my 17 years in the mortgage industry, I have found that this is one that is left out the most, when a loan officer offers a specific interest rate and explains the mortgage process. What good is my 30 day rate quote based on your closing date 60 days from now.
6. Loan Amounts - Believe it or not, a smaller loan amount with the same credit score and down payment will usually have a higher rate or more points/costs than a much higher loan amount.
Summary : As I have stated many times, you need to make sure that you are working with a professional loan officer. There loan officers out there that will not ask the correct questions, or those that might put you into the wrong type of loan just because they aren't familiar with other mortgage programs. The three mortgage programs that you need a loan officer that is knowledgeable are : FHA loans, USDA loans, and VA loans. Mortgage Interest Rates can vary drastically based on many pieces of the puzzle, yet this needs to be explained to the consumer.
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For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
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