This is one of the most confusing things for mortgage customers to understand. Unfortunately, mortgage rates are moving target. Loan rates adjust every day based on several economic factors and can change in the middle of the day if an economic report is released that affects the mortgage markets. Let’s say you see an advertised rate, call a bank, and the loan officer says: “sure, I can get you exactly that rate” and he secures it, chances are you got a good loan.
How do I know? Well, because most teaser rates are unavailable the moment they are published. Mortgage rates are adjusted daily. The rates are not a lie, technically; they were good for a brief time. But when you call for that specific rate, the factors that make rates change might have “changed”. This is called mortgage price low-balling and is not much different from a bait-and-switch in any other field. Because of the volatility of the loan market, providers cannot be held to price quotations, unless you have asked them to lock your rate at the time you speak with them. They assume that once you are in the application process, you will remain. Typically, homebuyers find the house they want, and then look for financing; the closing date clock is already ticking. This puts the buyer at the mercy of the lender. The pressure on the buyer to get the deal done as soon as possible means you will be less likely to shop your financing.
One way to avoid differences between the initial quote and your actual rate is to lock the rate. To lock a rate you must first have selected a property. Often lenders charge an application or up-front appraisal fee to ensure that you aren’t just price shopping. Many resources go into securing your rate. When lenders lock a rate, they have made a commitment to an investor. That investor will deliver a loan to them for financing within thirty to ninety days. It is a business courtesy to only asking for a loan lock when you are convinced you have found the people with whom you want to do business.
To keep current on traditional (good credit) mortgage rates, visit www.freddiemac.com. You will see the national average listed, along with the fees associated with that rate.
People often say they want “the best rate” but what they really want it the best rate for their situation. I often ask people what they mean when they say they want the best rate and they usually tell me that a friend got a rate of “x” percent. My next questions are:
Do you know what their credit scores are? (they would never tell you if they were low)
Do you know how much money they put down?
Do you know what the term of the mortgage is? (ARM, Fixed, 30 year, 5 year, etc)
Do you know their income?
Do you know if they used income to qualify or did they use alternative documentation?
Do you know if it is a primary, second, or investment home for them?
And most importantly:
Do you know that they weren’t just trying to make you jealous? This happens more often than not. Mortgage Interest Rates, become a bragging game. If your friend has horrible credit, she is not going to want to tell you she just got a rate of 8%, so she will do the next best thing – Lie to you and try to make you jealous.
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