“What’s the lowest rate?” This is generally the first question I get asked by prospective buyers or clients looking to refinance. As savvy borrowers know, the true answer depends on a number of factors such as credit scores, the eventual loan-to-value ratio, and the feasibility of closing within a designated lock period. Unless these and other factors have been fully evaluated, any quoted rate is essentially meaningless. (To have your credentials properly assessed and to receive timely quotes based on your specific requirements see my Customized Rate Watch below.)
The more relevant question is “how do I get the best rate?” With added delays brought on by newly mandated disclosures and HVCC-driven appraisals, your odds of getting a low rate are dramatically improved by positioning an organized file with the lender who is best suited to underwrite your loan. It’s important to know that lenders adhere to different guidelines and what one lender may reject another may approve. Common reasons for rejection include: unpermitted additions; using sole proprietorship business funds; unemployment income for seasonal employees; debt-to-income ratios exceeding 45%, etc. Placing your loan with the wrong lender can cost you time and money for appraisals, which under HVCC can no longer be transferred to a new lender.
Once your file has been underwritten by the chosen lender you may be eligible for preferred pricing based on your ability to close within a shorter lock period. Because it’s more expensive for lenders to hedge over a longer lock term and since an underwritten file has been fully qualified and is ready to close, a 15 to 20-day lock can easily lower your rate by .125%. Cumbersome disclosures can potentially jeopardize your ability to close within a shorter lock, so it’s essential to stay on top of the process at all times. Also keep in mind that loans above $417,000 are subject to restrictive TARP allocations and once a lender has met their 10% allotment their rates can shoot up quickly. For this reason and because banks can reject files right up until funding, it’s wise to also position yourself with a back-up lender.
Ultimately, many factors will determine the rate you get and there will always be an element of luck. But there are many steps you can take to improve the odds of securing the best rate. By properly organizing your loan file to address potential lender concerns in advance and by positioning your file with the bank best able to deliver on their promise, you are well on your way. The crucial first step is to accurately assess your qualifications with the eventual investor.
If you would like to be added to my Customized Rate Watch service contact me so that your credentials can be professionally weighed and shopped with the best banks and lending sources. A brief conversation is all that’s required for thorough analysis in order to find the best rates and to pair your loan package with the best set of lenders. You will then receive periodic emails with customized quotes based on mortgage options tailored to your specifications. This service is offered at no charge or obligation.
Nicholas Ballard is both a mortgage broker and banker specialized in the residential Marin market. For assistance, please call or e-mail:
Nicholas Ballard: 415-526-1941; firstname.lastname@example.org
Real Estate Financing
CA Dept. of Real Estate #01356374
California Mortgage Advisors, Inc.
CA Dept. of Real Estate #01170868
Redwood Highway, San Rafael