Welcome to the sexy page of the site!
I know this is all y’all care about. Because it’s all you’ve been told to care about in a home loan. It’s the easy thing to talk about to a neighbor, co-worker, acquaintance in passing without having to get too deep into your financial situation.
Let me be the one to break it to you: about 90% of the time, the same interest rate will be available to you, no matter what lender you choose to give your business to. So find someone(s) that you are comfortable talking to and who talks to you knowledgably and respectfully. There are a LOT of loan officers and lenders out there, and there is definitely a good fit for you.
And those super low rates (literally called “teaser rates” everywhere) you see on random sites, or in commercials, or in the ad bars of the webpages you’re looking at? Those are available, if you’re willing to pay for them. Even if you have perfect credit, all the dollars in the bank, and make all the dollars in income, you’re going to have to pay dollars to get that super low rate. There’s no avoiding paying dollars to get that rate.
What does go into determining your interest rate?
Just about everything discussed on this site:
Credit score – the higher the score, the lower the rate
Debt-to-Income ratio – the lower the ratio, the lower the rate
Loan-to-Value ratio – the lower the ratio, the lower the rate
Loan term (15yr, 30yr, etc.) – the shorter the term, the lower the rate
Occupancy type – Primary residence will get the lowest rates. Investment properties have higher interest rates
Loan types – Refinances: cash-out refinances have higher rates than rate & term refinances
The thing to keep in mind is that the interest rate is a culmination of the risk factors associated with your loan that the market is willing to bear, expressed as a number, which fluctuates with market fluctuations.
Which is why, when you tell your lender, “Hey, my neighbor got this lower interest rate when they bought their house last month, why can’t I get the same rate??” a good loan officer will say something along the lines of, “I don’t know why your neighbor got that rate because I didn’t close their loan, so I don’t know the details of their situation, I just know yours. That same rate is available to you if you want to pay $XXXX as that is what that rate costs in today’s market with your specific loan profile,” or something along those lines.
And when they say that to you, before you “pfffft” and go shopping other lenders, remember that you probably don’t know if your neighbor had to pay for that rate either because who talks to their neighbors about their finances in that depth?