As an established Mortgage Originator in the greater Seattle area, I’m often asked “what are the current rates” and that’s often answered with “that depends”.
Mortgage rates have layers of risk factored into them. Fannie Mae refers to them as LLPAs (Loan Level Price Adjustments).
When I’m pricing a rate quote, I use our pricing engine which sorts through all the lenders we work with and provides their current pricing based on the criteria I enter. The different lenders we work with may have better pricing based on various price points.
Here are some of the required criteria I need to consider before I’m able to produce live rates for my quote:
- loan amounts for the first mortgage and (if applicable) second mortgage or heloc balance
- estimated value of the property or sales price
- purpose of the loan (is it a purchase, refi, cash-out refi, etc.)
- occupancy (primary residence, second home or investment property)
- estimated mid-credit score
- property type (detached, condo, 2-4 plex, et.c)
- loan type (conforming, jumbo, fha, va, usda, etc.)
- loan term/amortization (30, 20, 15, etc.)
- amortization type: fixed or adjustable rate (arm)
- lock period (when is the transaction anticipated to close)
Any of the above factors can impact how a rate is priced. Add to this criteria that we’re dealing with live, changing pricing that is impacted by mortgage backed securities (bond markets). There also may be bank pricing overlays or special programs, like HARP 2 or Fannie Mae Homepath.
A borrower with a 719 credit score will most likely have a different rate than a borrower with a 720 credit score depending on loan to value and program type. A condo with 20% down is different than a townhouse that is not legally described as a condo. And this morning’s rates may not be the same as this afternoons.
This is why rates that are “static” (advertised in print or other media that is not live, like tv or radio commercials that are recorded in advance) are not reliable, considering how often rates may change during a day. Static rates you see posted on a website – especially if these rates do not refer to the terms that factored into arriving at the quoted rate, may not be reliable either. If a mortgage originator blurts out a rate over the phone without having the 10 points of information I’ve listed above, that rate is probably not accurate.
This is why when a potential client requests a rate quote, I gather the 10 points of information listed above and provide them a detailed quote, which includes apr and all closing cost associated with the transaction.