How your rate is determined is much more complex than the “type” of mortgage you have. Here is a list of 18 different types of variables that determine an interest rate quote:
- Origination Fee
- Required Escrow vs. Waiving Escrow
- Lock Duration: 15, 30, 45, 60 days or longer
- Total Lender Fees (Appraisal, Credit Report, Flood Cert, Tax Service, Doc Prep, Processing, Underwriting, etc.)
- Pre-Payment Penalty
- Credit Score
- LTV – Loan To Value ratio
- DTI – Debt To Income ratio
- Number of Months of Reserves
- Loan Amount: (Conforming vs. Non-Conforming) Smaller Amounts
- Loan Type: Conforming, FHA, VA
- Loan Product: ARM, Balloon, Fixed
- Loan Term: 40, 30, 25, 20, 15, 10, 7, 5, 3, 1 year(s)
- Loan Purpose: Purchase, Rate/Term Refinance vs. Cash Out Refinance
- Principal & Interest vs. Interest-Only
- Property Type (Single Family, PUD, Condo + New Construction vs. Existing)
- Number of Units (1,2,3 or 4-Unit)
As you can see, the rate you are quoted is much more complex than what you may read in the paper or see online. In fact, in today’s market, every rate quote is a custom quote. A lender quoting a RATE before getting answers to these questions is like a doctor prescribing medicine without diagnosing the problem: it’s MALPRACTICE!
Unfortunately, there are lenders out there who try to commoditize the interest rate by quoting the very lowest rates on the shortest lock terms available. The problem is almost NO ONE qualifies, and it would be nearly impossible to get the loan done in the short time period required. The only purpose of these low-ball quotes is to make the phone ring at the advertising mortgage company.
My policy is that I do not gamble with your money. I find that it backfires far too often. I don’t believe in taking chances with your money to try to get your business. You deserve better answers, not sales pitches. You can expect a comprehensive consultation & analysis, not an internet rate or newspaper ad.