The Mortgage Rate Myth

We all know that a small refinance boom is taking place and I cannot say enough how thankful I am to be swamped with business. However, I continue to get phone call after phone call with regards to the "media driven" 4.5% mortgage rates. First, let me say that mortgage rates are NOT at 4.5%! Second, today's environment is much different than the past. We now have "risk based pricing"; meaning depending on the borrowers risk (i.e. loan-to-value, credit score, type of home, and loan amount) will very much influence the rate at which the borrower can get.

For instance; a person with a 700 score, putting 10% down on a single family residence will more than likely get a higher rate than someone with a 740 score putting 20% down on a single family residence. Both are great scores however with "risk based pricing" anyone who has a credit score below 740 will take a "hit" to the rate. Let me reiterate so when you hear your friend, co-worker, or family member talk about the 4.875% rate they got; EVERY SINGLE INDIVIDUAL AND MORTGAGE APPLICATION IS DIFFERENT and NOT EVERYONE WILL GET THE SAME RATE.

It simply seems the media has got the general public fooled to think that if they can't get a mortgage rate in the 4's then something is wrong! Nothing could be further from the truth and ever since we started this "refinance rally" rates have not hit 4.5% not ONCE! So keep things in perspective when you are speaking with mortgage professionals. We want to get you the best rate possible but cannot work magic tricks in order to do it. If you qualify for 5.25% on a 30 year fixed that is a darn good rate! Don't be fooled by gimmicks and rates quoted below what the banks and mortgage companies are telling you over the phone. Are there points, broker fees, bank fees, origination fees, are they "portfolioing" the loan, what are closing costs? These are questions that you need to ask and you also need to know your credit score and loan-to-value.

Brought to you by Flat Branch Mortgage, Inc.
Your Mid-Missouri Mortgage Professional!
posted by: Shawn Von Talge