When embarking upon the mortgage loan journey, the typical borrower’s number one concern is how they can get the lowest interest rate possible. It’s inevitable that the rate question is asked early on, as it’s an essential part of judging if taking out a mortgage is a sound financial decision. Borrowers, whether they shop around or not, want to rest assured that they’re not being swindled, particularly at a time when “rock-bottom rates” are making headlines.
Consumers should be aware, however, that it’s very possible that the rates they see published won’t apply to their particular situations. Property type, down payment amount, amortization term, credit score, and rate-lock duration are all variables that factor into the equation, as do points paid or rebates credited against closing costs. As such, loan originators aren’t able to quote a rate (an accurate one, anyway) on command, as it takes a bit of time to obtain and analyze that information.
Given that they’re dictated by the whims of the market, rates are also subject to massive fluctuations over the course of a day, which makes pinning down the absolute lowest possible rate unlikely. Some lenders do offer the option to lock a loan a second time if rates fall, but “floating down” comes at a cost that is passed onto the borrower. Floating can also backfire if rates rise instead of fall.
Concisely stated, mortgage loan transactions are too complex for lenders to quote rates on a lark or simple supply and demand. Some borrowers contact multiple lenders and shop around for the best rate, which the federal government endorses—lenders are required to present borrowers with documentation that encourages consumers to make comparisons—but it’s tough, if not impossible, to outsmart the market. In the spirit of capitalism, compare Lender A with Lender B; however, it’s unlikely that one will quote a rate that’s life-changingly lower than the other.
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