Here are 5 reasons why
1. The rates you’re receiving may have been quoted on different days or even at different times on the SAME day.
2. Lenders’ access to the best rates can vary dramatically. (Most important.)
3. Lenders’ loan program guidelines may be very different.
4. You may have given the lenders different loan information.
5. You may have received inaccurate information or the lender may have poor procedures.
Here is the detailed explanation
1. Different days and different times. Interest rates change every minute of every day, but usually not by much. However, I’ve seen rates move as much as .50% in one day, due to surprising market information, such as terrorist attacks, Federal Reserve Board chairman comments on the bond market, stock market trading, international media information, etc. In addition, rates normally rise a lot faster than they fall.
2. Lenders’ access to the best rates can vary dramatically, which normally depends on two factors.
a. Brokers, mortgage bankers, banks and credit unions have different costs of money. Brokers are middle-men. Although they have access to an average of 20 different lenders, they are packaging your loan and selling it to the lender. Wouldn’t you rather deal with the actual bank or credit union that is funding your loan? I’ve seen a broker that was .375% higher on a high balance loan, $680,000, which equaled $134 higher payment each month. The local bank offered the lowest rate.
b. Management decision to charge higher fees for higher balance loans. I requested a quote for a high balance loan at $680,000 from a big bank (starts with a C). Their rate was 5.50% or 1.50% higher than the best rate I found with a local bank. Management believes the higher loan amount was a greater risk, so charged a higher rate.
3. Lenders’ loan program guidelines may be very different. Lenders perceive a higher risk and cost to certain loan programs, such as condos, non-owner loans, manufactured homes, rural areas, etc. Every piece of information on a loan has a risk or cost. So, rates and fees are higher or lower. In addition, if the borrower has a lower credit score, certain lenders also have higher rates and fees or may deny the loan altogether.
4. You may have given the lenders different loan information. Is one lender using a credit score of 620 and another lender 720? Make sure each lender receives the exact same basic loan information—otherwise the quotes may vary dramatically.
5. Inaccurate information or poor procedures. A friend of mine was offered 4% at the start of his refinancing loan. Three months later he wanted to lock the rate because rates had since dropped to 3.50%. Even though rates dropped, the Loan Originator and lender would NOT offer 3.50%. Either the Loan Originator made a mistake, or their procedures would not allow 3.50%. So, I directed the borrower to another lender, who processed and funded his loan in 35 days at 3.50%.
Don’t overpay for a mortgage loan. Ask questions, educate yourself (by checking this blog as an example), or better yet, hire the Mortgage Fee Coach to make sure you get the Lowest Rate with the Best Quality Lender. Email or call 949-484-6322 NOW The first 15 minutes are FREE.