In response to the higher mortgage default rates being experienced by Fannie Mae and Freddie Mac (the largest buyers of 30-year fixed, conforming mortgages), the formal announcement of "Risk Based Pricing" was established during 2008.
Before this was announced, a 30-year fixed loan was basically the same price for any borrower with a credit score of 660 or higher and a loan amount up to 95% of the home value. But now, Fannie and Freddie require pricing "add-ons" using a matrix of credit score and loan-to-value percentages. This risk based pricing is MANDATED by Fannie and Freddie, and is required of ALL lenders originating conforming 30-year fixed loans.
Sometimes the interest rate can be increased to cover these add-ons without having to pay them out of pocket, but that is becoming increasingly difficult in today's market. Investors have changed the way they create rate sheet options, and they offer very little in the way of what is called "premium pricing", which used to allow options for closing costs or points to be covered in return for a higher interest rate. But in today's environment, sometimes the add-ons must be paid in the form of points - to either keep the rate and corresponding payments as low as possible, or sometimes because there simply is no other way they can be covered.
The bottom line is - smart consumers can't just call a lender and say "what's your rate and closing costs?" There are simply so many unknowns with the combination of credit score, loan-to-value percentages, property type, etc... that any reputable lender should be upfront, and be clear that any quote given is based on an assumption of certain parameters.
We are here to provide honest, straightforward advice. If we can be of any assistance to you, your friends or your family feel free to contact us. We will take care of you and your referrals in the same upfront fashion as we always have.