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Sometimes borrowers ask, “Why don’t your rates match the ones I see online?” It is easy to quote rates out there, but every borrower should remember that their loan is different, and that often the advertised, or publicized, rates are slightly higher due to a number of factors.

 

First, the rates in Freddie Mac’s survey (which come out every week) include average discount points paid for the mortgage. But not everyone is willing to pay points: a point is 1% of the mortgage amount, charged as prepaid interest. Many borrowers do not want to pay points, and loan officers agree because unless you’re going to live in your home for a very long time, paying points often doesn’t make sense.

 

The second reason that your rate might be different than a rate you hear on the radio or see online is that your characteristics mean price adjustments. For example, a credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate. Focusing on LTV, for example, at least a 20% equity cushion (80% LTV) in your home for a refinance, or down payment for a purchase, will help obtain a better rate for a borrower. And if a borrower wants a jumbo mortgage, you will want 25% or 30% down for the best rates.

 

Property type also influences rates: in the current environment, liens on condos usually carry a slightly higher rate unless you want to put more money down. And if your mortgage is for a vacation home or investment property, you can also expect to pay a higher rate. And lastly, some lenders have so many loans in process that they will intentionally make their rates slightly higher in order to slow down new business. Your loan officer can help answer questions on the best rate and price combination.

 

 

 


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