Refinance borrowers sometimes see the rate quote in my daily blog and ask why their rate is higher than the “purchase money” rate quote in my blog.
B/c this has been happening more often than not lately, I thought it warranted a brief explanation.
ASSUMPTIONS FOR BLOG VS. FACTS FOR REFI
The assumptions we use for this blog’s rate quote include: a 75% loan-to-value ratio; a 780 or higher credit score; and “Jumbo” financing.
As I mention often, for strong borrowers, jumbo financing usually offers lower rates than “conforming” (Fannie/Freddie) financing.
So conforming borrowers often have higher rates than what I quote in my blog.
In addition, loan-to-value ratios and credit scores can also significantly affect rates.
I encourage everyone to re-read and/or share my blog about the 12 Factors That Impact An Individual’s Interest Rate.
COVERING CLOSING COSTS
Another reason our refi rates are higher is b/c we have to increase the rates to generate enough extra rebate or commission to cover closing costs (up to $4,000).
The quotes for this blog are for purchase money mortgages with no credits for closing costs at all. So, this factor alone affects the rate by about 1/4%.
Readers might also want to revisit this recent blog about How No Cost Refi’s Work.
RATES LOWER/RATE ROLL-DOWNS
Sometimes of course interest rates really are lower than where they were on the day we locked. If they are a lot lower, we are happy to roll down the rate.
But, as I mentioned in a blog last week, “rate-roll-downs” are expensive so we need a significant improvement before we can afford to cover the cost of a roll-down.
Readers might want to revisit my blog about Rate-Roll-Downs too.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646
