I came upon this internet “gem” today, written by someone working for a title company.
She commented this on a Facebook post pointing out how high mortgage interest rates were in 1985 (as high as 12% or even a bit over).
It may seem funny at a first glance, but here’s what’s wrong with this picture.
Adjustments to mortgage interest rate pricing consider strictly the following:
- Credit Score
- Loan to Value – determined by the amount of down payment, or “skin in the game”
- Loan Amount (lower loan amounts yield less profit for a lender)
- Loan Type – FHA, VA, USDA, Conventional or Portfolio (funky ones)
- Loan Term – 15, 20, 30 years (or whatever it happens to be)
- Type of Ownership – Primary Residence, Second Home or Investment Property
- Type of transaction – Purchase or Refinance (which can be streamline, rate and term, or cash-out)
- Number of units (more units are riskier)
- Condominium or not (condos are a bit riskier)
On a side note, a “manual underwrite” might cost you on the interest rate if the automated system gives out a Refer instead of an Approve result. This happens with lower credit scores (under 620), or with borrowers that have no traditional credit. If you have a 20% down payment, and choose to pay your own property taxes and homeowners insurance, a small escrow waiver fee will apply as well.
You don’t get penalized for having a short credit or job history.
You also won’t get penalized because your down payment came from your Mom, or your grandma, or as a wedding gift.
You don’t get brownie points for being a “seasoned” homebuyer.
And if you got seller paid closing costs in this market, give your real estate agent a big hug, and a referral or two – because he or she probably did an amazing job negotiating the home purchase for you.
Dear young person looking to purchase a home,
You have the right to the best interest rate you can get, and don’t let anyone tell you differently. Regardless of whether they are a title company agent, real estate agent or loan officer – or what their interest is in your transaction.
The mortgage industry has enough BS as it is – we don’t need more people perpetuating the wrong ideas. We need to support young people in becoming financially stable, not belittle them. We need to encourage and educate them, not be constant reminders of where they fall short!
Most importantly, we need to teach them to do their research. To challenge outdated ideas, and to not be afraid of getting a second opinion. And if some people choose to see this as entitlement.. they need to “shut the heck up!”. Facts are more important than your shaming, and businesses that prey on ignorant borrowers are (thankfully!) loosing their grip.
For a better mortgage experience, apply now.