How Can You Get the Lowest Mortgage Interest Rate When They Change Constantly?

Posted by  on Sep 04, 2009

Mortgage rates are driven by what happens in the mortgage-backed securities market (MBS), which is influenced by economic data, the performance of large corporations, and consumer confidence--like the stock market. And you know how often stock prices change each day, don't you? So why wouldn't mortgage prices be any different?

Mortgage Lenders Have to Move Quickly

In the past, a lender could afford to post interest rates for a few days or even a week. They made more money per loan and could afford to lose a little if rates moved. They didn't reprice until they couldn't afford not to. These days, competition is fiercer, profit margins are smaller, and lenders have to respond more quickly to market changes.

Risk-Based Pricing Means Your Lender Can't Give Everyone the Same Rate Quote

So unless you know how your credit rating and home equity (or down payment) affect mortgage pricing, you won't know what rate applies to you anyway. You can be prepared by knowing your credit scores and what your loan-to-value ratio will be. To see how much these factors affect rates, take a look at Fannie Mae's Loan Level Pricing Adjustment Matrix. For those refinancing a Fannie Mae loan, some of these surcharges don't apply. If that's your situation, find your Refi-Plus guidelines here.

So, How Do You Get the Best Rate?

First, compare rates between several lenders as quickly as you can--doing it online is a practical way to get lots of quotes within a short time frame. Then, call a few of the best, give them the facts about your property and your credit, and if you are refinancing, ask for a Good Faith Estimate and Truth in Lending disclosure--and if you could lock that rate for 30 days today. If you are shopping for property, you can't lock until you open escrow and can provide a property address. But quiz the lenders with good rates, find an agent you trust, and get the paperwork in order. Then you can lock your rate and pull the trigger when you're ready. Look on this site for our Best Rates and Lock Recommendation every day to see where the market is going and learn more about mortgage interest rates.


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