What should be my interest rate? (loan officer, California, credit score, 30 year fixed)

[solanoMan]

We are buying a 480k house, putting in 20% down, credit scores are 720 and 730, conventional loan 30 year fixed, located in vacaville, california. What should be our interest rate?

[rcarrillo]

If anyone gives you a straight answer to this.... they aren't doing their job. Just as if you called a doctor with a few symptoms and they wrote you a prescription.

It will vary and you need a full diagnosis to be sure. Credit and LTV are important, but so are many other factors like assets, debts, income and employment history. Having a 720 score and 20% down helps, but many programs will ask for more than that in order to qualify you.

Also, there is always a trade between closing costs and rates. The more you pay in one, the less you should pay in the other. Looking at rate alone is like setting up an appointment with someone at a certain time, but not picking a place... you are missing a key piece of information.

[brokerdave]

plus the state of california has its own special rates.

[obsidian97]

Not only should you talk to some lenders, I'd talk to SEVERAL. The numbers you're going to want to pay special attention to are the good-faith estimate of the closing costs and the effective A.P.R. of the loan (this rate includes the effects of all of the costs of the loan, not just interest).

The latter will give you an idea of the relative cost of that loan versus another loan.

Let's say lender A will give you a loan at 6.45% and lender B gives you a loan at 6.5%. Which one is better? Well, unless you look at the effective APR you might wind up picking the wrong one. If lender A has an effective APR of 6.9% and lender B 6.75%, then you'd be better off with B because the total cost of the loan is lower, despite the higher interest rate.

[rcarrillo]

Good advice obsidian97, just remember that a GFE or an APR are only as good as the person offering them. It is very easy to manipulate the APR, either intentionally or by accident.

Some loan officers have no clue what to include in APR and leave out items like mortgage insurance (or swear it isn't included) which will make their APR seem much lower when it isn't. APR is the true way to shop loans, and by law all lenders need to disclose APR in adds and on applications. In reality, most bury it in fine print or ignore the law.

[renriq02]

This is correct as most people may use different calculations to determine the APR.

Lender A & Lender B can have the SAME rates & the same closing costs, and still have different APRs.

Originally Posted by rcarrillo

Good advice obsidian97, just remember that a GFE or an APR are only as good as the person offering them. It is very easy to manipulate the APR, either intentionally or by accident.

Some loan officers have no clue what to include in APR and leave out items like mortgage insurance (or swear it isn't included) which will make their APR seem much lower when it isn't. APR is the true way to shop loans, and by law all lenders need to disclose APR in adds and on applications. In reality, most bury it in fine print or ignore the law.

[brokerdave]

You also cant forget, that maybe a lower rate long term is beneficial even if it costs more to close. discount pts usually break even between 24 - 36 months. so long term it can be quite important to buy the points.

it all depends on the person. its not a simple, fee, apr, rate.

[sbanawan]

You know, in reading these threads there's little wonder the mortgage industry is in a shambles. Why is it so hard to give a freakin' number? You compare it to getting a diagnosis from a doctor, but it's not a diagnosis! It's numbers and tables. There should be no uncertainty in the process, but that's all I read when I come to these threads.

/rant

[brokerdave]

well that's why people should have a good CPA or Financial Adviser. they can really take a lot out of the guess work. most of them have good brokers they can refer.

[rcarrillo]

Originally Posted by sbanawan

You know, in reading these threads there's little wonder the mortgage industry is in a shambles. Why is it so hard to give a freakin' number? You compare it to getting a diagnosis from a doctor, but it's not a diagnosis! It's numbers and tables. There should be no uncertainty in the process, but that's all I read when I come to these threads.

/rant

6%, happy?

The mortgage industry is in shambles because all lenders did WAS look and quote numbers. What is your credit score?? Here is your interest rate.

No one cared about things like risk tolerance, how long someone was going to live in a home, debts, income, other financial goals (putting kids in school, paying off other debts, saving for retirement), job stability, emergency savings, exit strategy, etc. All of these factors will and should be considered when someone buys a home. They will affect the program you chose and the rate you obtain.

Don't compare it to a doctor then, compare it to a financial plan, retirement plan, insurance coverage, etc. All of these items depend on multiple variables and a persons situation. There is plenty of uncertainity in the process because not everyone with a 700 score is the same. They have different factors, desires, needs and more. The same insurance, investment or budget will not work for all clients...

Offering mortgage options without a proper review might not be malpractice, but it certainly is a bad practice. I saw many loan officers that "quoted" great rates, but the people who lost their home's don't look back fondly at the % interest when they realize it was not the best loan for their needs.