Mortgage Morsels: What Are Interest Rates Now?

Excellent question. So call a lender and ask. And if they give you an answer without asking you any questions, say thank you, hang up and call someone else.

Why? Because in today’s world there is no such thing as “today’s interest rate”.

There’s barely even “this morning’s interest rate” or “this quarter hour’s interest rate”.

Additionally, there isn’t one interest rate at any given time. There are many variables that determine which one of many rates you can get.

The reason?

Risk management. (Funny how the lenders have decided to actually manage risk instead of create it. But that’s a topic for another post…)

Unlike a couple of years ago when one merely needed to be an inhabitant of the Earth and the nerve to apply for a loan to get a mortgage, banks have returned to, shall we say, more circumspect guidelines.

So, your interest rate will be determined by*:

• FICO score
• how much you put down
• loan amount
• type of loan (conventional, FHA, VA)

And in addition to all these factors going in to determine the interest rate, they will also determine how many points, if any, you’ll need to pay to get that rate. [For a quick explanation of points, read this.]

For example, if you have a FICO score of 720, are putting down 5% and are borrowing $150K with a conventional loan, you might be quoted a rate of 5.625% with 1 point.

Same scenario except you have a FICO of 650 and your rate could be 5.875% with 2.5 points.

Same scenario except your getting an FHA loan and your rate could be 5.5% with 1 point.

Any of these numbers may work for your situation and a good lender can help you sort out whether it makes sense to pay the points, put down more, change to an FHA loan, or wait and work on your FICO score.

The bottom line is this: Don’t think that whatever rate you read or hear about at any given moment in ads will be relevent to your situation. And a lender who starts asking you for more details is not being a jerk but rather is doing the right thing. One who quotes you numbers without determining some key factors is not serving you well.

Ask your agent, your parents, your cube mate if they have a good lender to recommend. There’s a lot of mortgage money out there to be loaned. Buyers just need to meet a few more requirements.

And being an inhabitant of Earth is still a plus.

* Mortgage lending practices can vary from region to region, lender to lender, and can be affected by market conditions. Lending criteria can change, and have. Often. The information I provide is based on my experience in my area. So, again, ASK QUESTIONS.