When I get asked what are current mortgage rates, usually my answer is either let me ask you some questions or a very vague "about 3.75%" or something like that. There are so many different pieces that go into a mortgage rate quote that it is very difficult to just rattle of interest rates.
Mortgage rates have layers of risk built into them. Fannie Mae refers to them as Loan Level Price Adjustments (LLPA's). Many lenders have some type of pricing engine that allows us to plug in different criteria to come up with an interest rate. If that information isn't correct, the interest rate may not be accurate. In the past, we would have a rate sheet that gave us basic information and we had to make adjustments based on the loan information.
Here is some of the information that we have to consider when we give a rate quote:
- Loan amounts for the first mortgage and if there is any type of second mortgage
- The value of the property or the purchase price
- If the property is owner occupied, a second home or an investment property
- The purpose of the loan - purchase, refinance (rate/term or cash out)
- Your credit score
- The loan type - conventional, FHA, VA, etc
- The loan amortization term - 30 yr, 15 yr
- The lock period - how long you are going to lock for
- Whether it is a fixed or adjustable rate type
- What type of property - single family, condo, duplex, etc
Any of this information can affect the interest rate. Sometimes just a drop of 1 point in your credit score can change your interest rate. If someone tells me they are buying a townhome, I need to make sure that it is really a townhome and not legally a condo. If it is a condo, there is a good chance there may be a fee that we need to include in the interest rate.
If you are checking interest rates, you need to make sure you are asking the right questions and giving the correct information. Sometimes clients will say that someone they know got X for a rate, why is mine higher (or lower), the answer is the type of loan, credit score, etc!! If a loan officer just gives you a rate without asking questions, you may want to check around for other quotes and see if you get different information!! The rate you were given may not be accurate in your situation!