I absolutely hate it when I see mortgage lenders and companies promoting and marketing super low interest rates that only 1% of people qualify for. They are not lying…but they are seriously stretching the truth. I saw this the other day where I saw an agent here in St. George sharing an image from a mortgage company online that contained a few different interest rates and APR rates. The issue is I ran pricing on my app…if you want this app hop down in the bio below and you can download it for free and run any mortgage calculation you need.. anyways..I ran pricing and I pretty much took the best case scenario. I’m talking about the golden borrower. This loan calculation was if a borrower had a 780 credit score, 20% down, 30% DTI, 2 months reserves on a normal stick build home and it would STILL take roughly $4,500 to buy down the rate to match what this other company was promoting.
Were they lying? I mean no….technically someone can get the interest rate they were promoting. The issue is no one in their right mind would put 20% down, pay closing costs (if they didn’t get seller paids) then also pay $4,500 to get the rate down. It doesn’t make sense in most cases.
That $4,500 is better to put towards the equity of their home just in case they end up selling the home or needing to refinance that current loan. One scenario this would make sense is if the borrowers planned on keeping the home for the rest of their lives. So although the rates that were being promoted are not 100% lies…but instead they are very unrealistic expectations for about 98% of the market. To be fair when I say 98% of the market I do not have data to support that claim and is based on my own personal experience working with everyday families.
Let me explain how your Utah Mortgage Rate is figured…
Your interest rate is based on risked-based pricing, which means the less “riskier” you are the better the interest rate you get. Does that make sense?
That is why you tend to see those people who have better credit scores get better interest rates..its because they are deemed to less “risky” of a borrower.
Based on your financial health and eligibility of a mortgage loan will really determine what your rate is.
Most people think the only thing that impacts their interest rate is their credit score. They are partially right, but your interest rate is NOT the only thing that impacts your interest rate.
1: The type of house you are buying has a factor (for example: A stick build home has different risk-based factors in comparison to a manufactured home)
2: The amount of money you’re putting down (this impacts the Loan to value which impacts your “riskiness” for example: someone putting down 20% will tend have a better rate than someone doing a 5% down payment.)
3: the loan program impacts the rate (FHA loans tend to get better rates in comparison to conventional loans, same goes for special first time home buyer programs and so on.
4: As most expect, your credit score has a large impact of the type of pricing you will be eligible for.
Now to be clear, anyone can almost get any rate they want…as long as they are willing to shell out the cash to get it. I would almost always recommend against that because you can put that extra money into the property and get more equity or ownership. Once you pay the rate down, that money is gone and the only way to recoup that money is by the actual interest rate savings from the loan.
I hope this information was helpful to you and the next time you see an advertised interest rate online or on a billboard think to yourself…..What kind of property is that on? What down payment is required, what loan program, and what credit score allows you to get that rate.’ If you found this helpful please like this video and subscribe below.
Thank you for watching. For more content follow me on Instagram and Facebook at – Alexh.mortgage. You can also join my exclusive group for mortgage education by searching on Facebook for Utah Mortgage Education or hit the link in the bio below. If you want to download my loan calculator app or fill out an application for a mortgage loan online you will find that information down below as well. Until next time, this is Alex Hernandez have a grateful day.