Mortgage rates have been making headlines this month, and often the rates quoted by the media are not the same. This is because rates are not controlled by the government, and every lender sets its own rates. Rates quoted are most often those reported by Freddie Mac or Fannie Mae. Fannie Mae. These institutions were created by Congress to stabilize and provide security to the mortgage industry. They purchase mortgages from lenders and sell them to investors as mortgage-backed securities. Their reported rates are the average rates of mortgages they have purchased from lenders.
It is important to note that these rates reflect what the market did in the near past, and do not necessarily indicate what is to come.
Lenders set their mortgage rates based on market conditions, as well as factors specific to their organizations, such as overhead costs and quotas, and rates can change daily. For this reason, and especially in this climate, we strongly recommend our buyers research and compare mortgage lenders. A lender’s rates will also vary by the borrower. Credit score, debt-to-income ratio, type and length of the loan, and down payment amount are a few of the factors lenders use to determine the rate they will charge each borrower.
When researching lenders, you should do more than compare their advertised rates. These rates usually represent the ideal customer, with a perfect credit score, 20% or more down payment, and low debt-to-income ratio. Instead, we recommend you compare rates by obtaining pre-approval from each lender. This will require submitting financial information, including pay stubs, W-2s or 1099’s, and bank statements. Because lenders run a credit check it is important to do these inquiries in a compact time period. Credit checks affect your FICO score. Credit bureaus will count these pulls as a single inquiry if completed within 30-45 days.
This sounds like a lot of work, but it is worth it. A point or two difference in interest rates can save you hundreds of dollars on your monthly mortgage bill and thousands of dollars over the course of your loan. For this reason, we saw an opportunity to add value for our clients by starting our own mortgage brokerage, Motto Mortgage Boutique. Vince Glakas is our talented loan officer who will do this backend work for you, and help you find and compare loans that best meet your needs. Through Motto Vince has access to rates being offered by many sources, and there is in most cases no charge to the borrower for these services. Lenders usually pay the brokers’ commission.
If you have questions about the real estate market or mortgage options, please reach out!