What is the best rate?

A common question that I hear from potential borrowers during our first conversation is "what are your rates?".  It seems that we have been conditioned as consumers to check the price of a product before anything else and then "rank" our choices based on which company has the "best price". 

The big problem when trying to analyze the "price" of a particular loan is that the buyer (the consumer) and the seller (the lender) are usually not on the same page when a "price quote" is made.  Comparing mortgage rates and fees is completely different than calling two competing grocery stores and asking for a price on a 12-pack of Pepsi.  The only differentiation in the Pepsi product is the price.  But the mortgage product has more characteristics than can be counted on one hand.

To give an accurate rate quote to a borrower, I typically need the following information:

1. Loan Amount
2. Purchase Price (the lower the relationship of loan amount to purchase price, the better the rate)
3. Credit history of borrower (including representative credit scores)
4. Property location (pricing can be different from one county/state to another
5. Property type (condo pricing is typically higher than that of detached, single family homes)
6. Occupancy type (is it owner-occupied or an investment property?)
7. Does the borrower want impound accounts for taxes and insurance (if yes, the price can be better)
8. Loan Type (does the borrower prefer a fixed- or adjustable-rate loan?)
9. How many points, if any, are being paid to reduce the interest rate

In addition, rates can (and will) change on a daily basis.  I have seen days where rates will change 3-4 times in one day.  Because of all these factors, and many others, comparing rates will always be a difficult task for consumers.  Your best bet is to get a referral to a loan professional from a trusted friend or advisor and to be prepared to answer several questions so that you can get a loan that best fits your requirements and qualifications.

Credit Score Resources

Do you know your FICO credit score?  If you are looking to purchase a home, be sure to look into your credit score well in advance.

 

Today’s market is competitive, with more cash buyers investing in property and multiple-offer transactions. Are you in the 700 range? 600 range?

You will need some time to find out your score and work on improving it if need be. Check out the below sources to help you assess your credit situation.

Four Good Sources of Credit Information

Here are four websites worth visiting, if you want to learn more about your credit reports and scores:

1. www.myfico.com — This site is owned by the company that created the credit-scoring model used by most lenders. The education tab is especially useful.  Take a look at the forum where you can post questions.
2. www.annualcreditreport.com — This website is jointly owned by the three credit-reporting companies (TransUnion, Equifax and Experian). This is where you should go to request your free reports. This is the only site that is regulated by the Federal Trade Commission.
3. www.ftc.gov/freereports — This website is useful to find out why a “free” credit report is offered, but then they try to “charge” you for additional things.  This is a marketing practice in wide use and this website can tell you more about it.
4. www.bankrate.com — This site offers credit tips and it explains the mortgage process. You can compare rates, use a myriad of calculators and check out their “news and advise” tab for pertinent news information each week.

The four sites listed above will help you get started on your home buying adventure.