What’s Your 30-Year Rate?

When people first make a call to a mortgage company, their very first question is most often “what is your 30 year rate?” This might have been a very short conversation a decade ago, but be prepared for a long list of questions now if you call and ask this question. Also, no matter where you call, we all sell our loans to the same people, and we all have Fannie Mae delivery fees (otherwise known as rate adjustments or loan level price adjustments). Whether you ask me or my competitor about our 30 year rates, we simply do not have one.

There is now a multitude of factors which decide your 30 year rate. One’s credit score, purpose of loan, loan-to-value ratio, property type, and occupancy status all determine your interest rate. There are delivery fees associated with each of these factors, and one could easily be paying one to four points to cover these rate adjustments. By the way, we recommend paying these fees upfront, or roll them into your loan amount, as it is usually the best option for most people as the rate will be higher if the rate adjustments are not paid upfront.

So what happens if a client calls me and asks for my 30 year rate? I run through the list of questions and give them an accurate rate based on the rate adjustments. What happens if they call my competitor and my competitor doesn’t ask those questions? My competitor spits out a rate without going through the particulars of the loan. This rate is often much better than mine, so my client ends up applying with my less-than-candid competitor. In many instances, I receive a call four weeks later from this client complaining they actually could not get that rate someone else offered them, and this applicant is now in a hurry to get to settlement.

Now what happens if the loan officer asks all of the right questions? What about the other fees? Rates have a direct correlation with fees. A loan with higher fees will usually have a better rate than a “low fee mortgage”. So be on the look-out for those “No Closing Costs Mortgages”. One should ask how the attorney will be getting paid if there are no costs. What about the appraiser? Will he be getting paid? One will find the interest rate is higher on these offers to make up for not having any closing costs.

The moral of this story is to find a trusted and licensed loan professional when shopping for a mortgage. Do not shop based on rates. Shop based on the competency of the loan officer. Ask your friends, family members, and co-workers for a referral. Your realtor will also be able to help you find someone they trust.