What Affects Rates For An Individual? A Lot!

Yesterday, I wrote an all too complex explanation about macroeconomic influences on interest rates, and got this wonderful feedback from a top producing KW agent:

I’m dying of boredom reading this….😁

OK – that is not the feedback we hope for, but I was just trying to be thorough…  :).

Today’s subject will be simpler and more relevant, however, b/c we often have borrowers come to us and ask “what is the rate?”

We respond by explaining there is no rate, b/c the market moves so often and b/c there are so many things that affect an individual borrower’s rate.

Here are factors that influence an individual’s rate that both borrowers and Realtors should understand in order to discuss interest rates in an informed manner.

Property Type:  Condos, high rise condos and multi-unit dwellings (2 – 4 units) usually have higher interest rates associated with them, as compared to single family dwellings.

Property Use:  Investment properties have higher rates than owner occupied properties.

Credit Scores:  Credit Scores significantly affect rates.  A borrower with a 750 mid-score might have a rate as much as 1% lower than a borrower with a 670 mid-score.

Down Payment:  The bigger the down payment, the lower the rate, in most cases.

Loan Amount:  Very small loans (under $150,000 for example) can have higher rates, as can very large jumbo loans over ($2 million for example).  In addition, “Low Balance” conforming loans under $424,100 will have lower rates than “High Balance” conforming loans (from $424,101 to $636,150).

1st/2nd Combo Loans:  Loans with a concurrent 2nd mortgage can have higher rates too, depending on the loan-to-value ratio.

If several of the above factors work in tandem, the rate can be significantly affected.  For example, if a buyer with a 690 credit score is buying a high rise condo with 5% down and a high balance loan, his interest rate might be 1% to 2% higher than his rate would be if he were buying a single family residence with 25% down, a 750 credit score and a low balance loan.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646