Riding on the coattails of a previous blog posting, regarding what ultimately determines mortgage interest rates, many prospective borrowers may also be surprised to learn that up to eleven different variables may affect the final interest rate they receive.
While many well intentioned family members, friends or co-workers may be quick to tell you to “shop around for the best rate” or any other manner of guidance and advice, how many are aware of your specific financial circumstances and how they affect the interest rate you qualify for?
Providing a borrower with an accurate interest rate quote, and ensuring that there are no unpleasant surprises at closing, requires that I consider all the variables that apply to you and how they affect your interest rate. These eleven variables are as follows:
- Term of the loan (30-year, 20-year, 15-year, 10-year fixed, or 1-yr., 3/1, 5/1. 7/1 or 10/1 A.R.M.)
- Amortization of the loan (Fixed rate or adjustable rate and fully amortized or interest only)
- Type of loan (Conforming (aka “Conventional”), non-conforming (aka “Jumbo”), FHA/ VA, USDA, and State or Local Bond Programs)
- Occupancy (Owner Occupied, 2nd Home or Investment)
- Purpose of loan (Purchase or Refinance. If Refinance, will the borrower be refinancing just the current loan balance or receiving “cash back” which includes paying off a 2nd mortgage that was taken out other than to use as part of the initial purchase mortgage).
- Property Type (Single Family, PUD, Condo, Manufactured Home, 2, 3 or 4-units, or other)
- Loan-to-Value (The percentage of the loan amount in relationship to the Sales Price or appraised value, whichever is lower. I.e., a borrower putting 20% down has an 80% loan-to-value).
- Credit Score (A borrower’s credit score may impact both the interest rate and what loan programs may be available. There may be numerous credit score “tiers” which may also impact the final rate)
- Loan amount (While Axia Home Loans has a minimum loan amount requirement of $50,000.00, loan amounts between $50K and $100K may have pricing adjustments. Loan amounts above $417K may also have additional pricing adjustments)
- Lock-in period (Interest rates and/or fees will vary based on the term of the lock-in. Common “lock-in” periods are 30, 45, and 60-days. Longer lock periods may also be offered at a higher cost. The shorter the term, the better the rate and/or fees. Borrowers need to be aware of their scheduled closing date when purchasing a home and be sure that the interest rate quoted is for a lock period equal to or greater than the scheduled closing date).
- Temporary buy downs (While not as common in recent years, certain loan programs may allow the borrower to “buy down” the interest rate for the first 1, 2 or 3 years of the loan before the permanent interest rate is in effect. Note: This should not be confused with an Adjustable Rate Loan. Temporary buy downs are utilized on fixed rate loans).
As your Loan Officer, I will evaluate your specific financial circumstances, answer any questions you have related to current interest rates, and provide you with correct and accurate information to help you make an educated and informed decision. Give me a call or connect with me on-line to obtain a current interest rate quote, get started on a Pre-Approval or get answers to any of your mortgage lending questions.