www.lasvegasmtg.com Report: The Untold Truth About Par Rate

By
Mortgage and Lending with All Western Mortgage Broker # 14210

www.lasvegasmtg.com Report: The Untold Truth About Par Rate

By John Le Francois

www.lasvegasmtg.com Report: The Untold Truth About Par Rate is different for each individual borrower! What Does It Mean?Investopedia.com defines Mortgage Par Rate as: An interest rate used as the reference point for which a Mortgage Lender will neither pay a rebate ( Yield Spread Premium or Negative Points ) or require discount points for a Mortgage.

With the definition from Investopedia.com we have as the basis that a Par Rate would be a zero YSP and a zero cost to the borrower. In today's market a Par Rate is as unique to each borrower as their finger prints are unique to every other person in the world. Why is this even remotely possible? I'm glad you asked.

Every Investor has a different risk tolerance that is reflected in their rates they post each day. The higher the risk the higher the rate. I will only be using one of my primary lenders for this article and their Pricing Adjustment. Risks are the overlays the lender have defined by these factors:

  • FICO Score

Conventional loans have 7 different Adjustment hits for determining par rate.

FHA and VA have 5 different Adjustment hits for determining par rate.

  • Loan Amount

Conventional Loans can have as many as 6 Adjustment hits for loan amount.

FHA and VA loans can have as many as 4 Adjustment hits for loan amount.

  • State Location

Conventional, FHA, and VA loans have 1 Adjustment hit for State Location.

  • Building Type, SFR, Condo, Duplex and Fourplex.

Conventional Loans can have 4 Adjustment hits for building type.

  • Loan Type

FHA and Conventional Loans do not have any Adjustment hits for Loan Type.

VA has 1 Adjustment for Loan Type.

  • Occupancy Type

FHA and VA do not have any Adjustment for Owner Occupied. 

Conventional Loans for Owner Occupied and 2nd homes do not have any Adjustment hits.

Conventional Loans have two Adjustment hits for Investors and LTV. 

  • Loan to Value

FHA and VA Loans do not have Adjustment hits for LTV.

Conventional Loans can have 4 Adjustment hits for LTV that are also tied to FICO Scores and Occupancy Type.

Calculating Par RateAs you can see there are so many variables that can determine what Par Rate would be based on specifics to each borrower and co-borrower that no two borrowers would have exactly the same rate. The last factor is the volatility of rate changes that can and do occur on a daily basis. Locking the rate in the morning could have a different result in the afternoon.   

 

 

 

Posted by

         Kenny Salame                                                                                                  Equal Housing

Kenny Salame
Senior Loan Officer
All Western Mortgage Inc.
8345 W. Sunset Rd.
Suite 380
Las Vegas, NV, 89113
US                            
Mobile: 702--506-3301
Direct: 702-947-0609
Office: 702-369-0905
Fax: 702-952-0887
ksalame@allwesterm.com
 
 
 
 
 
 

Comments (2)

Jon Sigler
Coldwell Banker Realty - South Windsor, CT
South Windsor Homes for Sale 860-306-8029

Everyone wants to get the rate they see in the paper, or on-line and wonder why they can't get it.  Maybe they could if it was a honest rate. but more borrowers now have adjustments to their rate than do not making that rate not available for most borrowers.

Mar 10, 2011 01:23 AM
Kenny Salame
All Western Mortgage Broker # 14210 - Las Vegas, NV
NMLS ID 313873

Jon,

You are correct that a customer still believes that rate that is advertised is the par rate. When they start the loan process they feel that they are a victim to bait and switch. There is truly no one par rate as in the past with all the overlays and pricing adjustments.

Mar 10, 2011 06:37 AM