Why Can’t I Get that Rate?

It’s a question I sometimes hear when buyers are shopping for a mortgage loan.  They’ve seen a mortgage rates advertised on a reputable website like bankrate.com— yet when they start talking with lenders they find that none of them are offering anything close to the advertised rate.  What gives?

Well, mortgage money is sold (by lenders to borrowers) and the greater the amount being sold, the lower the price (rate).  Like everything else, money is sold with discounts for volume.  If you think about it, it makes sense.  A lender has to do the same amount of work whether they’re making a $100,000 loan or a $600,000.  So, naturally a $600,000 loan is going to sell for a lower rate than a $100,000.  And here in central Indiana, the average home sales price is $140,000— a far cry below prices on either coasts where they range from maybe $400-900,000.  So, rates in Indiana are going to tend to be a little bit higher.

Here in Indiana, rates are better up close to the program ceilings ($295,550 for FHA and $417,000 for Conventional & VA programs) when compared to an average size loan.

Other factors weigh in when a lender is quoting you a rate.  In addition to the loan amount, things like your credit score, whether you’re self-employed or not, and the size of your down payment all make a difference.

Not to worry though… mortgage rates are currently running in the 3-5% range.  And that’s a far cry lower than anything we’ve seen in the past half century!  (Btw, if you’re looking for a mortgage, I know a guy!)