Home About Our Office Rate Quotes Testimonials
Partners Current E-News Community/Events
Document Downloads Featured Topic E-News Topic Archive   Directions  

Featured Topic: That’s not the rate I saw in the paper!

Why advertised mortgage rates can be different than YOUR rate.

When you open the paper, turn on the TV or listen to the radio, you might see great low rates advertised, which inspire you to go for that refinance or purchase. Exciting, isn’t it? So, you email the mortgage broker with the lowest rates. When the response comes back, the rate is higher than advertised. What gives? Good question.

 There are a few reasons that this happens: 

Advertised rates are based on a different loan amount. The higher your loan amount (also called your “principal”), the lower your rate. When you see a rate, it’s important to know what loan amount the rate is based on. Generally, anything listed as conventional rate is calculated based on a loan amount under $359,650. ($359,650 is the limit for conventional loans, anything higher is a jumbo loan.) But, in order to post the lowest rate, the advertised rate could be based on a loan amount of $359,649 - just under that limit! If your loan is only $100,000, your rate will be markedly different, perhaps as much as 1 or 2 percentage points higher.

 Major economic or news announcements immediately affect rates. When a major economic statement comes out or a major news event occurs, the average rate can go up or down in a matter of minutes. Yes, minutes! For example, when the Fed announces employment data or retail sales figures, the rates can immediately change. Any rate advertised that morning was no longer available. Immediate rate changes can also happen based on major news releases about financial companies (i.e., Fannie Mae) or political issues. And sometimes, the rates change for reasons internal to a lender, which aren’t at all obvious to the rest of us. Bottom line? Rates can shift quickly and dramatically, so staying in close contact with your mortgage broker is the best way to stay on top of these changes. 

Rates were posted prior to major announcement. Sometimes the rates you see advertised were submitted days before, and are already out of date when they publish. In the case of Bauer Mortgage, rates for Saturday’s Mortgage Marketplace are submitted on Thursday morning, based on the average rates available. Many major economic announcements are also made on Thursday mornings. When the lenders analyze these announcements, rates shift, and we’ll often get rate changes on Thursday afternoons or Friday mornings. So, by the time the paper publishes on Saturdays, the rates are already out of date. We try to anticipate some of this, but we have no way of knowing what the content of the announcements will be, how it will be interpreted by the lenders, and thus how the rates will be affected. What’s in the paper (the posted rates) is our “best guess” for lack of a better term, and until Greenspan starts calling us personally to let us know his plans – that’s the best we can promise. 

Your personal situation is different. The rates you see advertised are average rates. They usually assume a high loan amount, stellar credit, great income, a short rate lock period and overall, a very conventional situation. If your personal situation is any different, the rates available to you will be different. Plus, all lenders will post slightly different rates and programs. If your situation dictates that we lock your rate for a long period or use a specific lender, your rate may be different than the rate posted in the paper. This is especially common in the case of certain types of purchases, condominiums and investment properties. 

Consider the source. When seeing mortgage rates listed anywhere, you must understand the source and purpose. National rates advertised on TV are based on national averages, and rates can be different in different areas of the country. So, these national averages may be much lower or higher than what you can actually get in your region. If you’re looking at rates in the local paper – understand that it’s usually advertising. People pay to be in these guides, and are there to attract business. So, while it is not most company’s intention to mislead people, it’s like any advertising: the lowest, most aggressive rates will be advertised, usually based on high loan amounts and conventional situations. If your loan amount is lower, or your personal situation different, your rate will be different. 

The moral of the story? Don’t rely on advertised rates as a measure of what your rate will be. It’s just a market ballpark figure. Get a specific rate quote for you and your situation. If you’re comparing multiple lenders, be sure that you get a rate quote, along with all of the fees, processing time and service information. That way you can make an accurate comparison and choose the lender and situation that will work for you.

 To obtain your personalized rate quote from Bauer Mortgage Group, email loraine@bauermortgage.com or call 603-430-7729!