The Not so Simple Task of Quoting Interest Rates

     I liken Interest Rates to onions in more than a couple of ways.  Much like onions, Interest Rates have “layers”.  In today’s mortgage financing, a Mortgage Lender  must weigh all the facts, then peel away “layers” of information and data to find and reveal the answers to your Interest Rate questions.

Quoting interest rates is not that simple

     And right now with Interest Rates being at historic lows (but rising at time of writing), the more  you can peel away and sift through those layers of data and information, the better  Interest Rate you can get.  Interest Rates so low that they could make you cry,  just like an onion does.  Simply ask anyone that paid Interest Rates in the “teens” (or above) back in the mid-80’s if the thought of receiving a 4% or lower  Interest Ratetoday doesn’t about make them cry!  Tip: Be ready with a hankie …

   Interest Rates are a big deal to everyone considering the purchase of a home or thinking about refinancing.  Rightfully so.  All want to know, “What actually goes into determining the finalInterest Rate I will receive?”

    When speaking to clients, most are aware that their credit and debt … their FICO scores … play a big part in what Interest Rate they’ll receive on their mortgage.  But many do not know that there are many more pieces of info and data that also contribute to the final outcome.  (Especially true, if a first-time home buyer.)

    What are some of those other factors that I (as your Mortgage Lender)  will use to determine your Interest Rate?  They can include:
  •  What type of property occupancy is involved?  Will it be your Primary Residence?  2nd Home?  Investment Property?
  •     What is the property type?  Is it a Single-Family Residence?  Attached?  Condominium?  PUD?  (Planned Unit Development)
  •   As a result of the above question: How Many units are involved in the financing?  1-4?  More?
  •  What is the property’s location?  State, County, City?
  •  What type of loan are you seeking? FHAVA?  Conventional? USDA-RD?  Etc …
  •  Will you be paying Discount Points?  (Fees paid at Closing, in order to obtain a lower interest rate)
  •  What type of Transaction do you seek?  Purchase?  Refinance? ( Rate/Term Refi? HARP Refi (forUnderwater Properties)? Cash-Out(Loan above Balance), other) ?
  •  What amount of Reserves do you have?  (Months of Savings available for emergencies)
  •  What are your Credit Scores?  It is the MIDDLE Score that determines eligibility and loan approval.  If you are borrowing with a spouse/partner(s) … it is the lower (lowest) Middle Score of all involved, that determines eligibility.
  •  What is your Debt-to-Income ratio?  Meaning ratios of payments you make VS Gross Monthly Income.
  •  Loan-to-ValueWhat kind of down payment are you making? 3.5%?  5%?  10%?  20%?  It CAN be reflected in the Interest Rate you receive.
  •   If you are Refinancing, what is the amount of Equity in your home?  The Interest Rate you receive reflects the amount of Equity (expressed in terms known as Loan to Value, or LTV).
  •  Are there other factors contributing to your financial status?  If so, they are considered on a case-by-case basis.

     Whew!Timing is everything when quoting interest rates
     As though all of that isn’t enough, let’s add a bit of drama into this mix. As the old saying goes, “timing is everything”, so your Mortgage Lender now must strategically lock-in”  your Interest Rate.   Like gas prices and yo-yos … Interest Rates go up and down.  Because of this, “locking-in” the most advantageous Interest Rate becomes much like taking aim at a moving target.

    Take a gander at all those determining factors I mention and list above.  Does it become more easy to understand WHY … what seems on the surface to be a simple question … is in reality, NOT so easy for a Mortgage Lender to answer?

    The NOT so simple task of quoting Interest Rates.  If you are dreaming of buying a home in the future, get started now!  Allow yourself ample time to thoroughly prepare for your mortgage financing.
Allow yourself and your Mortgage Lender plenty of time for fact-finding and questions.  Truth is, it will take time to accomplish everything YOU need to do … and all that needs to be done on your behalf.


     It takes time and proper “timing” to seek and discover the most advantageous mortgage program and Interest Rates available to you.

     And please keep in mind … If YOU, or your clients, are in need of mortgage service and an Interest Rate quote … it’s absolutely the best time to work with an experienced, knowledgeable mortgage lending professional.  A successful outcome depends on it …

Gene Mundt

I am a 30+ year veteran of the mortgage/banking industry, with extensive knowledge and experience in mortgage and credit services, management, and real estate appraising. I am also an IL Certified Financial Planner. This unique combination of education, experience, and expertise affords me more complete and in-depth resources from which to service my clients and their needs.

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