Determining Loan Rates: A Guide on How Mortgage Lenders Determine Interest Rates

Earlier this month, we talked about why it is never a good idea to work with an Internet lender or even a company that is not local to you. 

We pointed out the hazards and how it’s actually better for the local economy when you keep your business dealings local.

We also noted how many people look for out of town businesses and use online lenders because of ‘specials’ and ‘guaranteed low rate.’ 

However, what we found was that no company could actually guarantee you a rate without first going over your financials, credit history, etc.

This blog post delves further into interest rates for mortgages and how mortgage lenders determine interest rates.

Interest Rates Explained

In truth, a lender really can’t know what your interest rate will be until they determine them through a multiple-step process. It goes like this: if you walk into a lender and just blatantly ask for the going rate, they cannot know the answer to that without first getting a bit of information from you. 

If they tell you otherwise or try to guarantee you a low mortgage interest rate, then you can expect to be hit with a number of various fees that don’t actually exist.

The information necessary to determine your interest rates consists of a few personal things like finances, credit score, and current job. For instance, the FICO score really has become the deciding factor with mortgage interest rates. 

What is a good FICO score? Essentially, the higher the score, the better chance you have in getting offered a low mortgage interest rate.

The FICO score may pay a large role in the rate that you end up with, but there are other things to factor in. The type of loan you get, for instance will affect your interest rate. 

A jumbo loan, which is a home loan for a house priced of or over $417,000, will raise your mortgage interest rate.  This is because the amount of the loan is larger as is the risk for the mortgage company providing you with that loan.

Another variable that can greatly affect your mortgage rate is the length of time you plan on having the loan. The longer the loan, the higher the rate will be. This is because you are taking a longer amount of time to pay back a large sum of money that the lender essentially stuck their neck out for you over.

In all actuality, it is all about determining the risk involved in providing you with a mortgage loan. Once the risk has been determined and assessed, an interest rate can be determined for you.

At Indigo Mortgage, we will always work to get you the very best rate, but we will never guarantee the lowest rate the minute you walk through the door. 

Our philosophy is honesty and integrity, and no one cares more about getting you the right loan – and interest rate – as we do!

Posted by Indigo Mortgage at 12:12 PM 3 comments:

 

Finding a Mortgage Lender

Monday, October 22, 2012

If you are looking for a mortgage broker, then chances are you have searched them up on Google or Bing or on some other search engine. 

It might have included various help and review sites written up by people just like you, different mortgage lending websites and Internet lenders promising the lowest possible rates. 

If you haven’t guessed it, we are going to talk about that last one and why it can be a terrible financial decision to not deal with a mortgage lender face to face.

Internet Lenders and their Hazards

Let’s clear the air on this real quick – no mortgage lender can guarantee a low rate. There are simply far too many variables to factor in and it is impossible for them to just give you that coveted 3% interest rate. 

Sounds like false advertising? Technically it’s not; they often can get you a fairly low rate however though. With that rate comes a whole bunch of fees that really are just made up.

Don’t get hit with hidden fees that pop up at the last second. Be smart and don’t deal with online mortgage lenders. It’s not just the fees though; online lenders could scam you among other things. Just remember that it is always safest to work face to face with a local lender.

The Facts

The facts in mortgage lending are that there is a process needed to be conducted to determine your eligibility for a rate. 

It’s not just some company guarantee it all depends on what you want, your financials, how long you will take to pay it back, etc. The variables that serve as the deciding factors for your interest rate include:

•        FICO scores must be above 740 for a borrower to qualify for that envied lower interest rate.
•          Loan term lengths also adjust the determined rates; longer loans mean higher rates.
•          A jumbo loan will also increase your rates.
•          If the risk is determined to be high by the lender, then they are going to raise the rates too.
•          Mortgages vary and so do their perspective rates.
•          Rental properties raise the rate.
•        Locking in your term will also alter the rate.

These are the key variables that are all required when determining your available interest rate. At Indigo Mortgage, we always recommend that you work face to face with your local lender. 

We like to know who are customers are and you should also likewise know who you are working with to secure the best mortgage loan and lowest interest rate for you.

Posted by Indigo Mortgage at 4:07 PM No comments:

The Good, the Bad, and the Ugly of Mortgage Interest Rates Dropping Below 3%

Recently, the Federal Reserve has begun to go through with their latest and greatest stimulus plan to help flip this economy right side up. The strategy has included lowering the interest rates to record lows. 

This blog post covers the good, the bad, and the ugly of this kind of strategy to help you, as a home buyer or home owner, to decide what is best for you.

The Good

The Quantitative Easing 3 is being applied and used to buy up mortgage bank securities to help in the effort of saving our economy. Their plan seems to be to buyout $40 billion in mortgage bank securities a month, but here is the kicker.

They have yet to set any real boundary or ‘end date’ to this effort. In fact, they may very well go on buying up these mortgage bank securities forever. The Federal Reserve has made it clear that they will only halt the process of Quantitative Easing 3 if there is a drastic improvement in the economy and labor force.

The Bad

Okay, so lower mortgage rates couldn’t possibly be a bad thing, right? For starters, rates are already at a historical and record breaking low. We have never been in such a buyer’s market before.

Sure, this does make things easier on the consumer and if the rates go a little lower (which they have), it’s even better, right? All of this is true, so what is bad about this whole thing?

The bad is what could come and it definitely leads to something disastrous and ugly. We will start by letting you all know that the rumors of below 3% interest rates on a 30-year loan are really just rumors. It could happen, but it wouldn’t be for a couple years and what causes it would likely be a catastrophic hit on our economy or the collapse of a super power.  

The Ugly

Everyone loves a deal, but there is a reason that unless your favorite clothing brand is going out of business you will probably never see something marked down at 90% off. So, why is this?

Profit, pure and simple, so when you start seeing record low mortgage rates getting lowered after you jump for joy on the savings you might stop to think how are they doing this? That is where the problem is -- over the next few years if the economy doesn’t improve, the rates will continue to lower and further sink the ship.

What it means

This means that caution is the operative word. It also means that it is a good time to jump into a home.

At Indigo Mortgage, we believe in the facts, we know everyone wants in their dream house, and we want to help make that happen, but you have to know what you are getting into and prepare by being informed. Let us help you! 

Posted by Indigo Mortgage at 3:48 PM 2 comments:

 

Why a Second Opinion Could be the Best Opinion

At Indigo Mortgage, we deal with dozens of great customers each day, and all of you have one simple goal in mind -- moving into your dream home. And, we can honestly say just how much we want to be there to help you along in your journey.

So, when customers come to us from another lender that has turned them away or just couldn’t produce the mortgage loan that is right for them, we are glad to do our best for them. 

This brings up the point of this week’s blog. Second opinions are important and not just for shopping around because you never know when someone else is going to have a better idea.

Reasons for a Second Opinion

There are a any number of reasons to look at getting a second opinion on your mortgage. 

This can be because you want the best deal or because you think that another company could do what you want that the current one won’t be able to deliver.

Let’s start with the most common -- shopping around. When you shop around, most often it’s because you want to get the best interest rate. When doing this, there are really only two things to keep in mind. First, get the broker to waive application fees and, second, never forget you are the final decision maker here.

Shopping around is common and simple, but it’s often the unexpected that comes back to bite you if you are not careful or done your homework. 

This is why we are going to talk about the one thing no one wants -- what to do when you have been turned down.

The first thing you should do is be thankful that you got them to waive that application fee. 

The next thing on your list is to decide whether or not you want to deal with that company and their counter offer or go talk to someone else.

 At Indigo Mortgage, we believe it is best to get a second opinion on the terms of a mortgage loan and interest rate, especially since someone else might be able to pull the right string to get you what you the perfect rate.

Come to Us for Second Opinion

Contact us today and tell us what you want so we can see what we can do to help you. 

While we cannot promise anything, we can promise to do our very best to get you nothing less than the best interest rate. At Indigo Mortgage, we believe in putting the customer’s needs first and over our own.

Posted by Indigo Mortgage at 11:37 AM 1 comment: