“Ballparking” mortgage rates just is not the same anymore. Home buyers who obtain online quotes from popular websites and “shopping” mortgage rates on the phone are receiving nothing more than a starting point for what their final mortgage rate will be. This is due to a government-led pricing scheme called loan-level pricing adjustments or LLPAs.”
The government has taken the example of risk-based pricing from the auto insurance industry. “Riskier” car owners pay higher rates for insurance, e.g. a driver with a few accidents and speeding tickets in their past will pay a higher premium than the driver with a clean driving record.
In the mortgage world, LLPAs are made against a multitude of loan traits. For example:
- Smaller down payment borrowers will pay more than ones with larger down cash out payments.
- A first mortgage with subordinate financing may pay a higher rate just as a cash out refinance.
- A lower FICO score borrower pays more than one with a higher FICO score
- Mortgages for investment property will cost more than mortgages for primary residences and 2nd homes
- Multi-unit home borrowers will pay more than borrowers with a one-unit home
- Condominiums may pay more for mortgages than that of single-family homes.
When “shopping” rates, make sure the facts are clearly stated. Earlier this week, I gave rate quote was .375% higher than a competitor (closing costs were pretty much similar); it turned out the lower quote was based upon a 2nd home that in reality was an investment property. The best advice is know who you are dealing with, and clearly state the facts.
Paramount Mortgage is a locally owned Mortgage Banker celebrating our 41st year. Great rates and programs are secondary to what is most desired in a lender relationship: Integrity, Communication and Customer Satisfaction. Be to check out our website: www.paramountmortgage.com
For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
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