I'm real excited that David and Karen Bell have invited me to be a contributor on their blog! For my first post, I thought I'd do a quick rate update to let you know what current rates are for today. Before I do so, you should know that there are several factors that impact how rates are priced:
- Credit score: today (with the exception of FHA/VA) rates are very credit score sensitive and are judged based on the lowest middle score of both borrowers. So if you have a married couple and one mid-score is a 740 and the other is 719--the rate is priced based on a 719 mid-score. And yes, there's a difference in rate between 719 and 720 for credit scores. This is one reason why it's important to meet with a Mortgage Professional early on in the home buying process. For the purpose of this and future rate quotes, I'm using a mid-score of 720. If your score is higher or lower, your rate may reflect that.
- Loan to value: Again, excluding FHA/VA, conventional loans are also impacted depending on how much equity or down payment there is with the purchase. Typically, the more down payment, the better. With FHA and VA, the amount of down payment does not impact the interest rate. For conventional rate quotes, I'm using 20% down payment (or 80% loan to value).
- Lock period. This is a trick some loan originators may use in trying to quote a lower rate. The shorter the lock period, the better the rate is because there is less risk involved for the bank. Since most purchase transactions take 30-40 days to close, I'm using a 45 day lock period. If your closing shorter than 30 days or longer than 40, your rate will reflect this (if you're getting an accurate rate quote).
- Points or No Points and Reduced Closing Costs. It is your choice on whether or not you want your mortgage interest rate priced with a point. "A point" equals 1% of your loan amount and it takes roughly 5 years or more to break even on paying it. Again--it's up to you. Typically, 1% in loan fee (point) equals about 0.25% to interest rate. If you would like to pay a point, your rate would probably be 0.25% lower with 1% more in cost. Closing costs can be reduced in the same manner, by increasing the rate slightly, a lender can pay for closing costs (there's no such thing as a "no closing cost loan--you're paying for it either in rate or fees).
Note: FHA and VA loans have different pricing criteria than conventional (Fannie/Freddie) mortgages. I'm finding that more and more mortgages are going FHA than conventional due to pricing and better underwriting guidelines. Do make sure that your loan originator is approved to do FHA loans (many are not) even if you're considering conventional financing just in case you need to switch programs for what ever reason. If your loan originator balks at FHA, odds are, they're not approved or experienced in providing one of the oldest forms of financing homes in America.
Here is just a small sample of rates quoted as of 1:30 p.m. August 27, 2008 (rates change several times per day):
Sales price of $500,000 with a $400,000 Conforming 30 Year Fixed priced w/0 points: 6.500% (apr 6.564) ~ priced with 1 point: 6.250% (apr 6.409).
Sales price of $500,000 with a $400,000 Conforming 5/1 ARM priced w/1 point: 5.750% (apr 7.099).
Sales price of $500,000 with a $485,000 FHA Jumbo 30 Year Fixed priced with 1 point: 6.375% (apr 7.183).
Sales price of $600,000 with a $480,000 Conforming-Jumbo 30 Year Fixed priced w/1 point: 6.375% (apr 6.531).
I have many other programs available. As I mentioned this is just to give you an idea of current rates. If you would like a personal quote for your specific scenario, please contact me. You can also see examples of rates that I'm quoting live (anonymously) posted on Twitter.
Watch for future posts. Is there a mortgage topic or question you would like me to address? Send me an email and don't forget to subscribe to The Seattle Real Estate Bell's Blog (simply enter your email address in the upper right corner and you'll receive an email when a new article is posted).
Rhonda Porter is a Certified Mortgage Planning Specialist and Licensed Loan Originator 510-LO-32047 at Mortgage Master Service Corporation, a Correspondent Lender serving Pacific Northwest homeowners since 1976.