The newspaper and the internet shows all these great mortgage interest rates, but when you call, your rate is higher? Why? What drives your rate higher than what is published? There are many variables when it comes to interest rates and here are a few of them.
-Your credit score. Most of the rates published are assuming a credit score of 740 or higher, usually there will be something in the fine print regarding the score. If your score is lower than that, your rate will be higher. There are adjustments for scores and the lower the score, the higher the rate.
-Investment property. If you do not owner occupy the property, the rate will be higher. Even if family is living in the house, if you are not the one occupying it, there is an additional cost.
-Is the property a condo? Condos usually bring a higher interest rate – not a lot more, but enough that you can see a slightly higher rate, maybe about .125%.
-Your loan amount. If you have a mortgage loan over $417,000, the rate is usually a bit higher. And at the same time, if the mortgage is very small, typically under $100,000, there may be an additional cost. You may want to compare rates on lower mortgages to see if you can save a bit of money. If you are looking at a mortgage over $417,000, it may be worth seeing if you can put a little more down to get your mortgage at or under $417,000.
-Are you buying a duplex? Multiple unit properties such as a duplex or 4 plex will have pricing add-on's that will increase your interest rate. If you are buying the property as an investment property, the rate will be even higher.
-Lender credit. Are you using a higher rate to pay your closing costs? No one wants to pay closing costs, but if you are using a lender credit, then the rate will be higher to cover those costs.
These are just a few of the reasons you may not have received the advertised interest rate. It may be worth checking with a couple different lenders to see if you can get a lower rate, but make sure you are telling them what you are buying. Usually if there is a much lower rate, you may not be getting an accurate quote. The loan officer you are talking to should ask several questions to give you an accurate interest rate. I always try to make sure I know what your credit score is, what kind of property you are buying and several other pieces of the puzzle to give you an accurate interest rate quote. Make sure you ask about fees as one lender may be quoting a rate with an origination fee and the next one might be quoting a rate without the origination fee. Ask questions so you know you have an accurate quote.