Category: Mortgage

Why do Different Lenders offer Different Mortgage Interest Rates?

When you begin the home buying process, you’ll quickly learn that different lenders offer you different loan programs and rates for loans that seem to be exactly the same.

You may get a personalized letter in the mail from a lender offering you an amazing low interest rate for a mortgage, or you see an online ad offering something similar and with an offer of no closing costs.

But when you inquire with a loan officer at your bank, the rate they offer you as an existing customer doesn’t match up. Why is that?

All Lenders Are Not Created Equal

Well, there a couple of reasons. When it comes to interest rates, not every lender is on equal footing. Banks have specific loan programs and rates offered by their organizations. Other lenders have access to more and sometimes better rates because they may have more funding available for loans from a variety of investors.

But this doesn’t necessarily mean that a bank or larger lender will be able to provide you with the best loan program. This is because each lender has different operating costs and overhead, which can result in higher fees. Every lender has a different pricing structure, which may make it confusing for you, the borrower.

Ads and Offers

The other factor that’s important to understand when shopping for a loan is the difference between an advertisement and a real loan offer.

Unfortunately, there’s still a lot of confusing advertising in our industry. In spite of all the new advertising regulations, many lenders use attractive “lowest rate” ads as a way to get you to call them. But when you read the small print and talk to them, more often than not, the interest rates being offered are only for “qualified borrowers,” which usually ends up meaning that 99.5% of borrowers can’t qualify that amazingly low rate.

For example, you may need a near-perfect credit score, put down 20% or more for a down-payment, have income within a certain bracket, and debts within a certain ratio, and the list goes on and on.

Compare Interest Rates and Terms That Are Best For Your Specific Situation.

The most important thing in selecting the right mortgage is to work with an experienced, loan officer who can realistically assess your financial situation. This means you’ll need to provide some information about your income, credit history, assets and debt, and maybe even some details about the home you’re looking to buy or refinance before providing you with a “real” interest rate.

When you’re ready to start the home loan process give me a call for a free pre-qualification review so we can determine the right home loan solution for you!

What is Private Mortgage Insurance (PMI)?

Private mortgage insurance (PMI) is an insurance policy used to protect lenders in the event that a borrower is unable to make payments on their mortgage. Certain home loans are viewed by lenders as being a higher risk than other loans. In the cases where loans are perceived as being riskier-ones in which the lender will need to cover 80% or more of the principal-the borrower is required to get private mortgage insurance (PMI).

private mortgage insurance [city2]

A PMI is made available from two sources: the government and private insurers. The primary government mortgage insurer is the Federal Housing Administration (FHA), while the private insurers are corporations.

It’s important for homebuyers in [city2] to understand that the lender does not pay the premiums on this type of insurance policy; the borrower does. And if the borrower defaults on their home loan, the lender is the beneficiary.

The precise percentage rate of the private mortgage loan varies depending on your down payment, but it can be anywhere from slightly over 1% to just under 0.4% of the original loan amount, paid annually. Those numbers may not seem intimidating on the surface, but they add up.

For conventional loans, the PMI must remain in place until the loan reaches 78-80% of the Loan To Value (LTV). So in the case of a 30-year loan, the borrower would be responsible for making PMI payments for roughly 24 years. In a few instances, the PMI never goes away and lasts for the entirety of the loan payments.

The good news about PMIs is that from the year 2007 and on, the payments are tax-deductible. Created around the time of the housing crisis and economic downturn, this form of payment allowed the total annual payments to count as an itemized deduction (with a few restrictions in place, mainly the household income). If you have any further questions I am happy to help or if you’re ready to set up a free pre-qualification review, contact me today!