“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.
St. Louis MORTGAGE INTEREST RATES for February 8, 2012:
- Conventional 30-Year Fixed 3.875%/ 4.190% APR
- Conventional 15-Year Fixed 3.375%/ 3.565% APR
- Conventional 5/1 ARM 2.500%/ 3.159% APR
- FHA/VA 30 Year Fixed 3.875%/ 4.085% APR
- Jumbo 5/1 ARM 2.75%/ 3.01% APR
- Jumbo 15 yr Fixed 3.625%/ 3.875% APR
- Jumbo 30 yr Fixed 4.875%/ 5.125% APR
*The above mortgage rates are based upon an 80% LTV, o/o single family with FICO scores of 720.
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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