By: Kim Davis, Loan Officer Assistant, Group One Mortgage (561) 745-6075
In mortgage lending, what you see is not always what you get. The mortgage rates that are advertised by lenders aren’t always available to average consumers. Even so, there’s a very good reason not to ignore them. Understanding the assumptions behind advertised mortgage rates can help you budget your home loan more effectively.
Throughout most of 2010, Freddie Mac’s Primary Mortgage Market Survey has reported average mortgage rates in the 4 to 5 percent range. At the same time, lenders have been pitching rates in the 3 percent range and sometimes even lower. What gives? It comes down to this: Freddie Mac’s survey is based on actual mortgage loans, while advertised rates are based on assumed conditions and qualifications.
A perfect world
Lenders develop advertised mortgage rates based on the best possible conditions, which may or may not apply to your particular situation. If you’re reviewing advertised mortgage rates online, you can usually locate fine print that describes the specific assumptions involved. Each lender defines these independently, but some common parameters are:
a minimum credit score of 740
a loan amount of $350,000
30-year, fixed-rate mortgage
maximum loan-to-value of 60 percent or 80 percent
30-day rate lock
establishment of an impound account for taxes and insurance
Even a slight difference in any of these factors would result in your mortgage rate being higher than the advertised one.
Lenders may also make adjustments based on the details behind the above factors. Take the credit score, for example. Lenders will review the amount of debt you have and your required debt payments. They’ll also analyze how frequently you open new accounts, and the amount of credit you use relative to what’s available.
For more information about Florida communities and investment opportunities contact Bold Real Estate Group.