Interest Rates: One Man’s Gain Is Another’s Loss

How can two borrowers can buy the same house, and get completely different interest rates? There are multiple considerations to take into account when a lender is pricing an interest rate for a customer……

In the old days, you used to be able to call a lender, give them a note amount and term, and get a quote. Lickety split. Not a lot of questions. Just “boom”, there’s your answer. It certainly made interest rate comparison much easier. But in today’s mortgage lending world, it’s just not that easy.

In fact, say you’ve got two customers buying identical homes in a development. Each customer can be quoted completely different interest rates for different reasons. Even if they have the same credit score. That’s because you’re granted different discounts or assessed with different cost additions for various aspects of your lending profile.

For instance, one guy may be getting a conventional loan, and the other an FHA (Federal Housing Administration) loan. With FHA and a credit score of 620, there are no discounts or additions for credit score that a lender will add to the total price. But, dip below a 620 and there will be quite a pricing differential. With a conventional loan, you’ll get discounts the higher your credit score. Thus, a 620 credit score in the conventional realm does not have as much interest rate muscle as a 720. And there are different cost hits in between for every 19 point differential. Plus, if you have less than a 620, you probably won’t get conventional approval. A typical lender nowadays has to be really good at reading a chart to quote a loan in the conventional world.
Another big factor is loan size. Again, you’ll probably pick up a discount if you’ve got a healthy sized loan. However, if you’re financing a smaller amount, it may cost you a bit. Thank goodness for excellent first time homebuyer programs that let qualified borrowers avoid some of these pricing hits.

Another big difference in interest rates available is the buyer’s intention for the property. If it’s a primary residence or a second home, one gets a better rate than if it’s an investment property. From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use. Statistics have proven this aspect of lending to be quite true. Of course, if it is an investment property, the borrower is going to have to come up with a heck of a lot more money out of pocket anyway. If it’s a manufactured home, you have to reconsider loan programs again. Some programs aren’t available for manufactured homes, and especially if it is a manufactured home that is an investment property. You’ll have to find a lender that specializes in this type of loan.

As touched on before, the type of loan matters, too. Conventional rates are different than FHA rates, which are different than VA rates, which are different than Rural Housing rates. Even for the same house. And again, as mentioned before, throw THDA or another first time housing program into the equation, and you start all over again. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. And you can’t get a rural housing loan if you’re in the wrong zip code and make too much money. So, at times, your choices are limited for you.

Even if you get the same interest rate, it doesn’t necessarily mean your payment will be the same. If your loan requires mortgage insurance, your monthly premium could differ because of your credit profile.

I guess the best advice is to be patient when considering loan programs and payments. Make sure you explore all your options. And don’t worry about the guy sitting next you. Just keep your eyes open and work with a lender that’s trustworthy.

Let My Experience Work For You!

Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.

Testimony - My customers are extremely important to me, and I am here to prove it

“Kristin was able to provide the dedication and information that I needed to purchase my first home. Without her wealth of knowledge and experience I would have never been able to get away from the money pit that calls it self “rent!” Thanks Kristin!”

~Travis G. / University of Tennessee


“Your home is your most important investment. For many people, it’s the largest debt that you’ll ever personally incur. And, your home is where you will raise your family and create your own secure haven. These are two compelling reasons why you should take the greatest of care and consideration when choosing a mortgage specialist. I will take all the time and energy necessary to ensure you have the best options before you when making the important decisions that affect your largest and most important investment. Let my experience and years in the industry work for you. My customers are extremely important to me, and I am here to prove it.” - Kristin Abouelata Mortgage Specialist

WBIR: ASK THE MORTGAGE SPECIALIST: Expensive homes going unsold?

The rates for jumbo loans (loans above $417,000) have caused somewhat of a glut in the real estate market of higher end homes. What's caused these rates to stay steadily higher while rates for traditional loan sizes have seen record lows in the past months?

According to Wikipedia, the definition for a white elephant is "a valuable possession which the owner cannot dispose of, but whose cost (particularly of upkeep) exceeds its usefulness." Hmmm. Sounds like some of the higher priced homes we hear may be sitting on the market a little bit longer than usual. According to the Knoxville Area Association of Realtors (KAAR), the number of homes valued at $500K+ which sold in May 2008 was 34. But there were 205 new listings.

(WBIR: Entire Story)

For your home lending needs contact:

Kristin Abouelata

8320 E. Walker Springs Ln #200
Knoxville, TN 37923
(865) 691-8910 office
1-800-489-8910
(865) 567-0113 cell (preferred)
Email: Kristin Abouelata Mortgage Specialist
www.kristinmortgage.com