​by Christian Scully

As we witnessed in 2020, news headlines and online advertising are enough to stir up excitement and send borrowers shopping and applying for refinances. 2020 even saw some interest rates under 2%! What those news headlines often forget to mention is the $10,000+ in discount points you'd be paying to get a rate under 2%. 

Sometimes borrowers will start a conversation with me by inquiring about the current interest rates. This is not a black and white question. Those advertised rates are generally the best rate you could possible qualify for under perfect conditions. However, in the process of applying for a mortgage, other details about the transaction are filled in. Those details can trigger a "loan level price adjustment" or LLPA. 

LLPA's can add or subtract a small amount to the interest rate for various reasons. The most recent newsworthy example of this would be the half-point (0.5%) fee that Fannie Mae and Freddie Mac added to all refinances after 9/1/20, named the "Adverse Market Refinance Fee". In most cases, this would cause the interest rate to increase simply for the fact that the loan purpose is a refinance. 

Other details that will affect a borrower's qualifying interest rate include their credit score. For example, if the borrower has a 580 credit score, their interest rate will increase more than if the borrower as a 660 credit score. If the borrower is applying for a mortgage on a primary residence, the interest rate will be lower than if it is a second home. Interest rates for investment properties are significantly higher. Interest rates for multifamily properties will be higher than for single family properties. Rates for 5% down payment will be higher than 20% down payment.

 
​by Christian Scully

So you've been pre-qualified for a mortgage, you have walked dozens of houses with your realtor and finally you've found the perfect house. Your realtor submits your offer and you nervously wait to hear the seller's decision. The call comes. 

The seller selected your offer. You're under contract to purchase the home!

The next step is the mortgage application process. Yes, you already likely submitted some documentation and maybe even filled out an online application, but now all the pieces need to be put together by your loan officer, then processed and submitted to the underwriter, who will ultimately decide if your loan will be approved. 

Along the way, your loan officer will be communicating with you about the interest rate. Interest rates are impossible to predict, but there can be trends. If rates are trending down, your loan officer might suggest holding off on a rate lock. But if you qualify for a great rate on any given day, it may be in your best interest to lock it in. Why not wait? 

What if your loan officer presents you with an interest rate that is higher than you heard of on the news, read about on social media or otherwise expected? Is it still a smart move to purchase the home? I've been asked this question many times, and for me, it is a really simple answer.
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