The most common question mortgage lenders face immediately upon connecting with a potential borrower for the first time is “what would my interest rate be?”. While this is a logical question, it is not as straightforward as it appears.
Obtaining a rate quote is a detailed process and the mortgage professional will ask several follow-up questions before providing you with an accurate rate quote. They need to obtain additional information about you and the property you are looking to buy or refinance. If you do get an immediate response, you should be incredibly skeptical of the validity.
There are more than a dozen factors all of which affect your individual interest rate. These include many well-known factors such as credit score and property type along with more obscure factors that borrowers never think or hear about such as the commitment period and current program incentives.
Since more than a dozen factors do not make rates factoring complex enough, they fluctuate daily based on market conditions. Oftentimes a quote obtained from a lender at 9 am will likely be different than a quote obtained at 2 pm on the same day. Should you choose to shop for the best interest rate, it is incredibly important that you do so within a tight timeframe to get a similar snapshot of when the rate information is collected.
When talking to multiple lenders it can be tricky to compare rates on a 1:1 basis. Mortgage lenders can charge points to artificially lower your interest rate. These points sometimes make sense however can also be used as a pure marketing tactic by an unscrupulous lender. Another tactic sometimes used is quoting a rate lower than they could offer today with the hope they will be able to offer it by the time the transaction takes place. Some lenders offer low-interest rates but offset them with high fees in other areas.
Also remember, while interest rates are important they should also not be the only determining factor in why you choose to work with a specific lender. There are many other factors that are also important such as speed of transaction, communication, and transparency.
The best lenders educate their clients and provide options that allow them to make educated decisions. For more information, please visit our website or call and discuss your options with one of our mortgage professionals at (760) 930-0569.