New York Mortgage Company

Archive for the ‘Mortgage Rates’ Category

How do they determine my interest rate?

Mortgage rates are primarily affected by the stock market, the 10 year Note more specifically. When the 10 year note goes up the rates go up. You can track this in your local paper or financial channel on television. Rates go up and down everyday and sometimes more than once a day. It is up to the broker (us) to lock in the rate at its lowest point. You should also keep an eye on the 10 year bond to know when the broker should lock in the rate.

We check the rates several times daily and read the predictions on how the rates may move so that we always lock in our clients at there lowest rate possible. This is important because if a broker does not watch the market carefully, the 10yr Note can shoot up, and the rate that he/she quoted you will no longer exist. That means you get a phone call with some excuse as to why they can no longer provide you with the rate you were promised. Instead your rate is now half to1% higher then you expected.

*Note: B/C bank rates however are not affected daily so it is not important to lock the rate in.

Shouldn’t a Broker Lock your Rate Early?

This is a topic we didn’t plan on getting into. If you watch the 10yr Note yourself you won’t have to worry about this. Through experience, we have realized that you’re probably curious as to why this rate lock mishap might happen.

Let us explain a possible reason; When a broker first speaks with you ( over the phone) they have to sell you the fact that you should do business with them, not the other brokers you have spoken to previously. Every broker (salesman) knows that the main priority of the potential client is the rate (price). The broker then dangles a bait the client can’t resist, in front of them – a rate that is lower then any other broker has offered. The client then takes the bait; and now the broker only has to hope the 10yr Note go down to the point where the ‘wishful thinking rate’ he promised the client will actually exist. Usually, the client ends up not getting what they were promised. Don’t fall for this; if it sounds too good to be true, it probably is.

We want to let you in on a little secret. The rates that a broker is offered from a bank on a particular loan is no different then the rate that same bank would offer another broker. The difference in rates quoted, can be linked to a number of reasons: the days that the broker quoted you for example. Since rates go up and down every day it is important that you compare rates on the same day. It can also have something to do with the bank that he or she is quoting you from, (see “what factors determine my interest rate” section), or it could be that the rate he or she is quoting is a “bait and switch” rate. The bottom line is as I stated above, if it sounds too good to be true it probably is. Do your home work and see what the average rates are and go from there.

A Personal Tip:
Shop for rates with 3 or 4 brokers allowing only one to pull your credit and get quotes from them on the same day. Make sure you give the brokers as much information as possible and make sure they all get the same information. This will allow for a more accurate comparison.

What factors determine my Interest Rate?

The rates that an individual gets are based on factors such as: Debt to income ratio, loan to value, credit scores, cash out or rate in term re-finances, primary residence or investment property, single or multi family home, etc. There are many factors involved in deciding what rate the bank will offer you. This is all based on risk (as the bank sees it). If a person has good credit, a low loan to value ratio, and a no-cash-out loan (rate in term) he will get a better rate than someone with bad credit a high LTV and a cash-out loan. This seems obvious, but a lot of people think banks have one rate and everyone should get the same rate.

Do you notice that banks’ advertised rates are usually rates nobody qualifies for? They don’t tell you that those rates they advertise are interest-only rates that adjust every month, and are only for people with 800 credit scores. They don’t show you the rates 90% of the people end up getting. This is called “Bait and Switch”. The bait is what gets you to walk in the door. Once they have you committed to them, they switch the rate. We’re going to tell you the way things really work. The rate you will be offered starts off at what is called the “base” or “start” rate, then it is increased incrementally for each individual high risk factor.

A Note to Guide You:
Example: “Bank A” has a 25% add on for bad credit, .25% add-on for high LTV, and a .5% add-on for cash out. They are called add-ons because they add on to a start rate. A person with good credit, low LTV, and no cash out may get a rate of 5%. A person who has bad credit, bad LTV, and a cash out loan may get 5%, plus .25% (bad credit), plus .25% (high LTV), Plus .5% (Cash out) for a total of 6% interest rate. The trick, or key, is to find the bank with the lowest amount of add-ons for your particular loan.

We are signed on with over 70 different banks; each bank has an average of 20 different programs which gives us over 1,400 options to choose from when it comes to finding the right program for you.

** Also read sections: Credit Scores, Refinance My Mortgage, Purchasing a Home