Factors That Affect A Borrower’s Rate; Must Know Before Quoting Rate
Borrowers often come to us after getting misleading rate quotes from large banks or on-line lenders. This is b/c the loan officers sometimes quote rates before obtaining all of the necessary information.
There are many factors that influence interest rates. This is why it is impossible for us to just quote a rate before assessing all the factors.
What Affects Rates?
1. Property Type: Condo loans usually have higher rates than single family residence loans, for example.
2. Property Use: Owner occupied properties have lower rates than investment properties.
3. Credit Scores: Depending on down payment size and loan type, credit scores can affect rates by 1% or more.
4. Down Payment: The bigger the down payment, the lower the rate in most cases.
5. Loan Amount: Smaller loans ($200,000 or less) sometimes have higher rates b/c lenders make less money selling them on the secondary market. “High Balance” loans over $417,000 usually have slightly higher rates than loans under $417,000. And, very large loans, over $1.5mm for example, often have higher rates b/c the market for them is smaller and b/c they pose much more risk in general.
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