Shopping for an Interest Rate?

Minneapolis, MN:  Thinking of refinancing your home?  Are you a First Time Home Buyer?  Homeowners have thousands of choices when it comes to shopping for their mortgage loan, and sometimes all these options can spell trouble.

Pretty much every phone call I take starts with “What’s your interest rate?” While this seems like a very logical question to ask, it doesn’t give the lender all the information needed to give you an accurate answer.

rates_compareThis goes for online mortgage interest rate search tools too.  While you may put in some basic information, I haven’t seen a system yet (including ours) that could ever replace a actual Loan Officer and be 100% accurate.

There is no generic rate: A common misconception is there is a “rate”…   We’ve all hear the commercials… “The rate today on a 30-yr fixed is ____, and only at so and so company.”  I cry foul!  The only way you can ever get an accurate interest rate quote is to supply a mortgage company with a complete application, and the lender also reviews a credit report.

Credit Score: To accurately quote you an interest rate, a lender has to run your credit to determine your credit score. Interest rates can vary greatly on some programs depending on credit score. Most loan programs have pricing adjustments based on credit score, so without looking at your credit, any lender quote is just guessing.  While I like to believe what people tell me, until I see for sure, it doesn’t mean anything.  I can not tell you how many times someone has said “I have excellent credit,” (which is a 740 middle credit score or higher), so I quote them based on that score,  only to actually review their credit the next day to find out their score is a 700. On some programs, the difference between a 740+ score, and a 700 score could mean as much as 1/4% (.25) higher interest rates!

There are at least 21 criteria that goes into determining your interest rate.  Here is a small sampling:

  1. Credit score
  2. Loan program
  3. Loan Size
  4. Down Payment (or equity position)
  5. Owner-Occupied or Investment
  6. Closing cost options

I consistently hear, after I’ve taken a full application and accurately quote a client “That’s different than I saw (online, in the news paper, on TV).” The general attitude is that  my quote is high.  The reality is you are usually comparing an accurate quote against teaser advertising rates, or rates that do not apply in your situation.

So be mindful of the difference between advertising and reality.  Let a professional Licensed Loan Officer (NOT A BANK), review your complete application for an accurate quote.

 


Mortgages rates basically unchanged for week ending 11/23/2012

Mortgage Rates Basically Unchanged

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates virtually unchanged and remaining near their record lows amid growing concerns around the fiscal cliff. The 30-year fixed-rate mortgage has averaged below 4.00 percent all but one week in 2012, while the 15-year fixed-rate mortgage has averaged below 3.00 percent since the last week in May.

News Facts

  • 30-year fixed-rate mortgages (FRM) averaged 3.32 percent with an average 0.8 point for the week ending November 29, 2012, up from last week when it averaged 3.31 percent. Last year at this time, the 30-year FRM averaged 4.00 percent.
  • 15-year fixed rate mortgages this week averaged 2.64 percent with an average 0.6 point, up from last week when it averaged 2.63 percent. A year ago at this time, the 15-year FRM averaged 3.30 percent.
  • 5-year adjustable rate mortgages (ARM) averaged 2.72 percent this week with an average 0.6 point, down from last week when it averaged 2.74 percent. A year ago, the 5-year ARM averaged 2.90 percent.

Quotes Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Mortgage rates were virtually unchanged this week amid growing concerns around the fiscal cliff. Although low mortgage rates failed to boost new home sales in October, year-to-date sales are up 20 percent compared with 2011 volumes, and there are growing signs of a turnaround in house prices. The S&P/Case-Shiller® national home price index (seasonally adjusted) rose 5.2 percent over the first three quarters of this year. In addition, all 20 of the city indices (seasonally adjusted) had positive growth over the first 9 months, led by a 17.9 percent increase in Phoenix. More recently, the Federal Reserve’s November 28th regional economic review, known as the Beige Book, noted that 10 of the 12 districts reported the market for single-family homes continued to improve leading into mid-November.”

Freddie Mac’s survey is the average of loans bought from lenders * last week, including discount points. Applicants must pay all closing costs at these rates. No cost loan rates higher.

Follow this link to view today’s best MN and WI mortgage interest rates.

 


Winning or losing – How to play the Mortgage Interest Rate Game

Mortgage interest rates — just like stock prices — change price daily and you can win big or lose big if you don’t know what you are doing.

#1 Mortgage Interest Rate and Lender Shopping Tip | MN and WI Mortgage Rates | Quote, Float, or Lock? |

For the home buyer that is “shopping” for a mortgage, or waiting for rates to fall, or just “hasn’t gotten around to it”, we suggest you almost always lock, and to do it quickly. The sooner you lock your rate, the less chance you have of losing in the Mortgage Rate game.

If you are refinancing, you can gamble a bit more, but if you have a signed purchase contract in hand, lock your rate as soon as possible.  There is no better way to protect yourself from the fickle mortgage markets. Holding out for 1/8th – 1/4% more is just not worth the risk! If you want to gamble… go to Vegas.

What is a Rate QUOTE? When buying a home or refinancing, it is common to call around to many lenders to get a rate quote. A quote is not a guaranteed rate. Another common issue with getting a quote is you often get one from Lender A on Monday, Lender B on Tuesday, and Lender C on Wednesday. Rates can change daily, sometimes multiple times, so unless you get all your quotes at the same time, you don’t have accurate information. THE ONLY QUOTE THAT MATTERS IS THE DAY YOU LOCK. Many lenders quote you low to get you to stop shopping, knowing that you will usually NOT be locking the same day of the quote – especially for any purchase loans. Be wary of anyone significantly lower than anyone else.

What is a Rate Lock Period? The lender will usually quote rates along with a rate lock period, usually 15, 45, or 60 days. The loan must close within this period. The longer the rate period, the higher the interest rate.

What is a Rate Lock? When you “LOCK” your interest rate with your lender, you and the lender agree this is the guaranteed rate you will receive, and that no matter what the markets do before closing, you will not be charged a higher rate if rates go up, and you will not be able to get a lower rate if rates go down. Your rate lock should be in writing.

What Does It Mean to Float? Floating your rate means means that while your loan is in progress, the rate is NOT yet guaranteed. You are taking the risk that interest rates will either not go up or that they will fall. If rates have been dropping, then you might want to take a chance that rates will be lower by the time you close your loan than they are today. Discuss the floating with your Loan Officer. Sometimes it is worth the gamble, sometimes it isn’t.