When it comes time to shop for a mortgage, I advise checking sites such as this one; to get an idea of where mortgage rates are currently. However, you cannot rely soley on the figures given on any of the big box lender sites or even this one for that matter. Why? EVERY MORTGAGE IS DIFFERENT.

The number 1 thing that will affect the interest rate is Wall Street. Mortgage rates change every single day, sometime multiple times per day. Interest rate move up an down as they react to several indices on Wall Street. The simplest way to get a read on where rates are going is to check the 10 yr treasury yield. A lower yield is good for a rates, a higher yield is bad. It is really that simple.

 

Every day, lenders publish rate sheets. These rate sheets will have BASE prices to obtain particular rates. To determine your interest rate, I would take the base price and then add or subtract all applicable adjustments and this will give the final buy price for a particular interest rate. Factors such as Credit score, Purpose of transaction, Loan amount, geographic region,  Lock in period, Loan to Value ratio, and Occupancy are just some of the factors that will affect your rate.  Below I will detail two seemingly similar loan scenarios, with very different interest rates. This is an example only and does not necessarily reflect loan adjustments for any particular lender.

 

 

 

Both scenarios look similar. Both have great credit. Loan amounts are close. Let's see how it breaks down:

 

	Scenario 1   /  Price adjustments	Scenario 2 / Price adjustments
Loan Amount	200,000     /   no change	189,000    /  -.25 for loans below 200k
Property State	Maryland    /   +.15	Virginia   / no change
Purpose	60% no cash out  /   -.15%	77%  Cashout  740 credit score or greater/   -.50
Property type	SIngle Family / no change	Condo over 75% LTV / -.75
TOTAL ADJUSTMENTS	No Net Change to Price	-1.50

Now let me explain what this means. Let's say that a 5% interest rate for this day is the BASE Zero point interest rate. In scenario 1, the client would NOT have to pay any points to secure this rate. In Scenario 2, the client will have to pay 1.5 points to secure the same interest rate. If you wanted a ZERO POINT interest rate for scenario #2, I would find a rate that is priced at 101.50 subtract the 1.50 adjustment and end up at 100 or PAR. For this example, let's say that rate is 5.25%.  You would have 2 nearly identical loan scenarios, with 2 very different rates

 

This is what Fannie Mae calles RISK BASED PRICING. They take certain criteria that data suggests will either help or hurt the probability that certain loans will perform well. They then create loan pricing adjustments that will  affect your final interest rate for better or for worse. This information is not available on most internet rate charts. It is important that you work with a local professional that will help you understand why your interest rate is different than your friends, or one that you saw on the website of a big box internet lender.