Friday, February 28, 2014

What is the interest rate today?

 “So, what is the interest rate today?”  I’ve been asked this more times than I can count.  It’s always difficult to answer because there are so many variables…What loan type? Term? Credit score? Loan to value? Investment property?  2nd home?  Primary residence, etc.  You could go to a lenders website or but what I tell people, including realtors, is…Ask Freddie.  Freddie Mac puts out a weekly interest rate survey that gives you a quick average at a glance.  After all, most people don’t want more questions…they just want a number.  Here's a number or two:

More than you ever wanted to know about interest rates…Ok.  You’ve been warned.  Here goes:  

Interest rates for mortgages can and do change daily.  If it’s a volatile day they can change mid day.  And more than once.  It makes for an interesting challenge trying to quote interest rates on a day when things are changing rapidly.  Usually that’s due to stronger than expected economic news or world events.  Bad news for the economy typically translates into good news for rates.  It’s an inverse relationship…except when it’s not.  That’s the frustrating thing about trying to guess the direction of interest rates.  It’s like trying to guess the weather.  We know how accurate that little system is!

A person’s mortgage interest rate is also tied to several individual factors.  Things like your particular credit score can mean a big difference in rate compared to the next person in line.  Other common pricing adjustments reflect the risk to the lender.  For example a non owner occupied home (a rental) requires a higher interest rate than an owner occupied loan when all other variables are held even.  It’s interesting to note that even different parts of the country offer slightly different rates.  I get rate sheets from several different wholesalers every day and they nearly always adjust their pricing based on region.  So a person in Idaho may be quoted an ever so slightly different rate than someone in Texas.  Think of it like car insurance.  Your driving record, what you drive and where you drive it all impact your auto insurance rates.  Similar idea for mortgages.  It’s all about risk. 

Here’s a couple more things a lot of people don’t understand about mortgage rates:

#1 – There is a range of rates available to you at any given time.  It’s a question of cost.  So, you may be able to choose between a pretty wide range of rates based on what you wish to pay, or not pay, in closing costs.  People often assume there is one rate for a particular day.  There is always a range to choose from and the lowest rate is rarely the best deal.  A good loan officer should help guide you to the best choice for you. 

#2 – How long your rate lock is good for can have an effect.  The longer the lock term the higher the cost.  Lenders will often offer to let you “lock in” your rate for 30 days.  Or 15, 21, 45 or 60.  You then have that many days to get your loan closed.  It doesn’t do any good to take the 15 day lock in if it’s going to take 45 days to close your loan.  And while some lenders will allow you to extend your lock period for unforeseen delays they likely won’t do it for free.  Again, best to have an experienced loan officer walk you through it.

So, if you just want a “number” and don’t really need to know all the details a quick reference point is the Freddie Mac Weekly Rate Survey.  I try to post it to our website and our facebook page every week.  You can Click Here for a link as well.

Eric Lundberg - NMLS #261588
President, Chinook Mortgage Ltd - NMLS #261588

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