What's your rate?
As a mortgage professional, one of the most frequent questions I receive is 'What's your rate?" By far the majority of my clients are personal referrals and are very polite when I explain to them there are approximately 30 different things I need to know before I can accurately quote a rate. Please keep in mind this doesn't include any of the planning and strategy questions that ensure we are discussing rates for the right mortgage!!
If you are a number-phobic person you may want to skip the next document (or take a handful of Advil beforehand). Otherwise, please step into my world:
If your heart is palpitating you should probably step away from the numbers. Or switch to decaf. Hey, I warned you. Take a couple of deep breaths and I will walk you through this step-by-step so that anyone can understand what you are reviewing.
This is our rate sheet for today. It's a pretty simple rate sheet but it does get much more complicated. We have one lender that has rate sheets that stretch over 14 pages. Legal sized. Fortunately no one faxes rate sheets anymore so the only trees being killed are virtual. In addition to our rate sheets, I have approximately 20 other rate sheets emailed to me daily. Sometimes we have the best rates and sometimes we don't. That's why it's great to be a mortgage banker AND a mortgage broker as we can place the loan with whomever has the best rates. We will save this discussion for another day.
Let's examine what I have posted. The first two boxes are labeled '30 Yr Fixed' and '15 Yr Fixed.' Just to the right of these boxes there is a bigger box labeled as 'Pricing Adjustments.' As you can see there is a fairly lengthy list of adjustments. We have to account for the following factors:
- Loan to Value (LTV) and Combined Loan to Value (CLTV)
- Primary, Second, or Investment home
- The number of units
- Type of property (single family, multi-family, condo)
- Mortgage insurance
- Loan amount
- State
- Escrows (will you pay your taxes and insurance with the mortgage or on your own?)
- Type of income, asset, and employment documentation (full, reduced, stated, no doc)
- Is it a purchase or refinance?
- Is it a rate and term refinance or a cash out refinance?
- What does your credit look like?
- How many months of reserves can we verify?
- How long does our rate lock need to be (the shorter the lock the better the rate)?
This represents a lot of the information we need but by no means is exhaustive. Most lenders have standard adjustments for all of these items, but they are not identical. If I quote you a rate without gathering this information I am making a number of assumptions, and there are three possible outcomes.
First, I can make incorrect assumptions that are too conservative and quote you a rate that is higher than what you will qualify for. Second, I can make incorrect assumptions that are too aggressive and quote you a rate that is lower than what you actually qualify for. Third, I can make the correct assumptions by pure chance and quote you an accurate rate.
All three of these outcomes are unacceptable to me because I am a professional mortgage planner. I do not run my business through chance or guessing, nor do I want to risk an unpleasant client experience by quoting a rate that I cannot deliver.
The next time you are starting the mortgage process and checking on rates, please understand that your mortgage professional needs to spend some time and ask lots of questions in order to make sure they are providing you with the most accurate rates and terms. If they don't don't take this time, you might want to reconsider who you are working with. As always, I would be happy to provide you with a free mortgage consultation and ensure that you receive the best mortgage and best terms possible.
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