Mortgage Rates: Why What You See Is Not What You Get

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Reconciling Published Mortgage Rates with Lender Rates

Reconciling Published Mortgage Rates with Lender Rates

You’ve probably read articles or saw on the news that mortgage rates are at “historically low levels.” This news may have even caused you to act, calling your mortgage lender and checking out a couple of other lenders. The mortgage rates that these lenders are quoting you are low, but not as low as you expected. Find out why the rates you’re hearing about and the rates you are receiving as quotes don’t quite match.

Rates Change Constantly

The primary reason you may receive conflicting information is that mortgage rates tend to change on a daily basis. In some circumstances, mortgage rates may even change multiple times during the day. Even a slight delay between when you hear about “mortgage rates hitting record lows” on the news and when you have a chance to contact your lender can make a difference in the rate you’re quoted.

Generally, interest rates do not swing from one end of the spectrum to another in quick-time. So, when you obtain a phone quote, you may see an eighth or a quarter of a point difference. And don’t forget, the difference can go either way. You may find the interest rate the lender quotes you is higher than what you read or heard about, but you may also find it is lower.

Points Matter

The mortgage rates you read or hear about on the news versus what you receive as a quote by phone may also vary according to the number of points you are paying. Points are pre-paid interest and one point equals one percent of the loan amount.

A news article or even rates published on a lender’s website may be rates assuming you’re paying one, two or even three points, which lowers the interest rate, but requires that you bring more cash to the closing table. Always look at the fine print when viewing published rates online or in print to see how many points are assumed, so you can be sure you’re comparing apples to apples.

It’s All in the Score

[Mortgage Help: Get your free credit report and see if your credit score is mortgage qualified]

Published mortgage rates also tend to be best-case scenario rates. In other words, these rates tend to be those that only people with excellent credit will actually receive.

If you don’t have a good credit score, then your interest rate is likely not going to be as favorable. While you may very well still receive approval on the mortgage, the lender will offer a mortgage rate that matches your risk level as a borrower – or how likely you are to default on your loan – which is measured in part by your credit score.

When you’re checking into whether you can take advantage of “historically low mortgage rates,” remember that mortgage rates are constantly changing and published rates often vary from quoted rates because of things like points and credit scores. The only way to ensure a particular rate is to lock it in with your lender.

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