Mortgage Rates Explained
Mortgage interest rates change every day and sometimes multiple times throughout the day. If there is a lot of volitality in the stock market, we can even experience multiple rate changes in a day.
What determines your Mortgage Interest Rate
There are actually many factors that go into determining your mortgage interest rate
- Credit Score
- On a Home Purchase – your down payment
- On a Refinance – the equity in your home
- Are you paying extra fees (points) to buy down the rate
- Going mortgage rates for the day
- Loan programs
Most mortgage rates are offered in increments of .125%
Most mortgage lenders and banks will offer you rates that are 1/8th apart. For example, you can get a 5.0%, 5.125%, 5.25%, etc. Some lenders, such as ourselves, can get you a custom rate of your choosing. This makes it much easier to get the perfect rate!
Protecting your Interest Rate
In order for you to protect your rate, you have to request a Rate Lock from your lender. Typical rate locks are 30 days. Some rate locks can be shorter or longer. The term of the lock will determine the cost of the rate. Shorter rate locks cost less than long rate locks. Super long rate locks such as 6 months / 180 days will require a nonrefundable fee up front. This strategy is used in cases of long escrows but mainly in new construction. With rate increasing significantly, we’ve seen the long-term locks be utilized a lot more often than before.
Comparing Mortgage Rate Quotes can be overwhelming and confusing
There are a few things to take into account when comparing mortgage rates. Lenders will try and provide you with different options to confuse you so you’re not able to shop your deal. This is a sales tactic that is used not just in the mortgage industry but in pretty much any sales. Keeping your main factors the same will ensure that you are making a same comparison and you’re able to determine the true cost of your rate.
Apples to apples comparison
As mentioned before, lenders will try to throw you off by changing variables in your quote so they can’t be shopped as easily. Make sure that all factors stay the same including loan amount, rate, value of your house, credit score, purpose of the loan to name a few.
Integrity of the Loan Officer you’re working with
This is one a little bit harder to quantify because you’re trusting someone is giving you accurate information and has your best interest in mind. A quick way to find out how a loan officer has conducted themselves is by doing a quick search on Google and seeing client reviews. If the loan officer has bad reviews or no reviews, that’s usually a sign of someone not so straight forward with their business. Working with a loan officer that is highly reviewed by clients is the way to go!
Loan officer Knowledge
Although experience doesn’t always equal knowledge and expertise, typically someone who has been in the industry for 10+ years will be more knowledgeable than someone that just got into the business last year. You can check your loan officer’s work history on the NMLS website. If they just got done bartending or driving a Zamboni last month, chances are they might not have the skillset to guide you through the loan process efficiently.
There’s many ads you will run into online, TV, radio or any other media channel. The main purpose of the ad agencies is to get the phone to ring or people in the door. This leads to some loosey-goosey advertising that can be suggestive of something that’s actually not real. It’s always best to speak with a mortgage professional and get a real time accurate quote. If something seems to good to be true, it most likely is. Also, typically the larger the lender the more they will charge you since they are spending a ton of money on national advertising, salaries and fancy football stadiums all paid for by you. An independent mortgage broker such as ourselves can typically give you a much better rate and lower fees since we operate on much lower margins.