How Do You Find the "Best Mortgage Rates" Listed on Shoprate.com's Blog and Lock Recommendation?

Posted by  on Apr 13, 2010

Question: I have noticed that the "best interest rates" on your daily blog are always higher than Freddie Mac's "average interest rates." Why is that, and how can I find the lenders offering these "best interest rates?" Is there a list of them on your site?

"Best" Mortgage Interest Rates Shows Where the Market Is Heading

Answer: The "best interest rates" come from hundreds of lenders in the industry as well as sites like Mortgage News Daily, Market Watch, and CNN Money. Shoprate experts check the lending industry daily for rates from wholesale and retail providers. Most of the time, individual lender are "advertising" these rates--they change far too often for that to be the case. Instead, the "best" is a snapshot of the market in a single moment. Many times the loan pricing is live and updates constantly.

"Best" Mortgage Quotes Apply to Perfect Transactions

In addition, the posted rates probably won't apply to your exact transaction--the borrower has to be practically perfect, the property must be practically perfect, the down payment must be healthy. Variables like your credit score, property type, loan use (purchase, refinance, cash-out, rehab), loan amount, state or county, lock period, and others can change the rate and terms available to you.

Risk Based Pricing Affects Average Interest Rates

Average interest rates are always higher than best interest rates, because it includes borrowers who don't qualify for the best rates. The higher rates available to many borrowers push the average rates up. Risk-based pricing used by Fannie Mae and Freddie Mac can increase a rate fast.

For example, Fannie Mae's Loan Level Pricing Adjustment (LLPA) matrix details the surcharges that lenders have to hit you with if you don't meet the "perfect transaction" criteria. Check out the price add-ons to a cash-out refinance, 85% of the property value, for a borrower with a representative credit score of 680.

  • AMDC (adverse market delivery charge--all loans gets this) = 0.250%
  • Representative Credit Score LLPA = 1.000%
  • Cash Out Refinance LLPA = 2.500%
  • Minimum Mortgage Insurance (riskier than a loan with more coverage) = 0.125%

That's 3.875%, or an extra $11,615 on a $300,000 loan! When pricing several sources, try all types of lenders, including mortgage bankers and brokers, and ask what goes into the the pricing of your loan. Make sure that all lenders have the same information about you--property type, location, credit, and down payment, for example.

Remember that no lender is committed to a particular interest rate at a specific cost until you apply for and lock your mortgage. At that point, unless your circumstances change, you lender has to stick with the fees disclosed on the Good Faith Estimate, which, by law, the lender must provide to you.

In order to get the best mortgage rate available for your exact circumstance, discuss your loan with several lenders. It's easy to get a batch of quotes by completing an online inquiry--there's one on this site in fact. Make sure you compare their costs, interest rates, level of service, and expertise, because all of these items are part of obtaining the "best possible" mortgage quote.


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