Excellent question. So call a lender and ask. And if they give you an answer without asking you any questions, say thank you, hang up and call someone else.

Why? Because in today’s world there is no such thing as “today’s interest rate”.

There’s barely even “this morning’s interest rate” or “this quarter hour’s interest rate”.

Additionally, there isn’t one interest rate at any given time. There are many variables that determine which one of many rates you can get.

The reason?

Risk management. (Funny how the lenders have decided to actually manage risk instead of create it. But that’s a topic for another post…)

Unlike a couple of years ago when one merely needed to be an inhabitant of the Earth and the nerve to apply for a loan to get a mortgage, banks have returned to, shall we say, more circumspect guidelines.

So, your interest rate will be determined by*:

• FICO score
• how much you put down
• loan amount
• type of loan (conventional, FHA, VA)

And in addition to all these factors going in to determine the interest rate, they will also determine how many points, if any, you’ll need to pay to get that rate. [For a quick explanation of points, read this.]

For example, if you have a FICO score of 720, are putting down 5% and are borrowing $150K with a conventional loan, you might be quoted a rate of 5.625% with 1 point.

Same scenario except you have a FICO of 650 and your rate could be 5.875% with 2.5 points.

Same scenario except your getting an FHA loan and your rate could be 5.5% with 1 point.

Any of these numbers may work for your situation and a good lender can help you sort out whether it makes sense to pay the points, put down more, change to an FHA loan, or wait and work on your FICO score.

The bottom line is this: Don’t think that whatever rate you read or hear about at any given moment in ads will be relevent to your situation. And a lender who starts asking you for more details is not being a jerk but rather is doing the right thing. One who quotes you numbers without determining some key factors is not serving you well.

Ask your agent, your parents, your cube mate if they have a good lender to recommend. There’s a lot of mortgage money out there to be loaned. Buyers just need to meet a few more requirements.

And being an inhabitant of Earth is still a plus.

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If you have questions, comments or a good joke to share shoot me an email.  I’m a full time Realtor®, I love what I do and would be thrilled to hear from you.

* Mortgage lending practices can vary from region to region, lender to lender, and can be affected by market conditions. Lending criteria can change, and have. Often. The information I provide is based on my experience in my area. So, again, ASK QUESTIONS.

My previous post referenced the interest rates that were available a couple of days ago. The point of the post was to communicate that there is mortgage money available to be loaned.

In that post was hidden in plain sight the fact that interest rates do not come in a ‘one size fits all’ package. So, if a lender gives you a straight up quote without asking things like how much the purchase price of house is or how much your planning on putting down or what your FICO score is, thank them and move on to another lender. And if you are asked these questions, please don’t feel like you’re being played somehow.These are variables that absolutely impact the answer as to what an interest rate will be.

On top of all that, remember that interest rates can change frequently. They’ve dropped about .5 point in the last week.

Why all the probing when all you want is an answer to what you’ll pay for an interest rate on a mortgage?

Much of it is a result of the turmoil in the credit markets recently. Lending is all about leveraging risk. As stated in the previous post, lenders need to lend money. It’s their raison d’être. But good lenders need to look at many factors to determine the likelihood of being paid back and therefore cut a break to those presenting less risk and charge a bit more to higher risk borrowers.

[Much of this reasonable circumspection was thrown out the window over the last few years, thereby creating the calamity before us, but that is a topic for another day...and a bottle of wine.]

Now, back to those variables.

Something that is a new practice, and it looks like this just started a week or so ago, according to my trusted source for all things mortgage related, is lenders actually charging a higher interest rate for those putting down 20% than those putting down 5%.

“Wha???” you might exclaim. And you’d be justified. That just seems weird. Why should a borrower who’s willing to have skin in the game to the tune of 20% of purchase price be charged more than one putting down 5%?

The reason is that, as has always been the case, if one puts down at least 20% on a mortgage, no PMI (Private Mortgage Insurance) is required. Anything less and the borrower does have to pay for PMI, thus insuring the lender in case of borrower defaults and stops paying on the loan. The reasoning was that if someone has committed 20% of their own money, that was ‘insurance’ enough that they would move heaven and earth to avoid defaulting and risk losing their home.

That was B.C. (Before Calamity). Lenders now fear that the same 20% commitment will not protect against default, and since the loan isn’t covered by PMI, they have greater risk.

My personal feeling is that this will not last. But it may.

So, should one keep their down payment money in their pocket and get the lower rate? You need to put pencil to paper and get all the data to make that decision. The lower rate may be countered by the PMI premium. And that premium is not buying you any actual equity in the house.

Ask a good lender, get the facts. The truth shall set you free.

You may have, just maybe, heard a news story or two (thousand) about the economy. In broadcast journalism, the practice of coining a few catchy phrases and repeating them ad nauseum, has become the rule of the day. You know what I mean. One begins to wonder if certain words can be uttered without certain others. Try to say “downpour” without saying “torrential”, or “controversy” without “firestorm of”. Or “credit” without “meltdown”.

Go ahead. Just try.

But the thing is, there can be downpours that aren’t torrential and not all credit is in meltdown.

There is mortgage money to be loaned. And the lenders want to make you these loans. They don’t make money unless they loan money. (Commercial credit, now that’s another creature and is not to what I refer here.)

The catch is that you have to have a job, a decent FICO score and some money to put down, none of which is unreasonable if you want to borrow money. And it’s the way it always was up until things got wacky in the lending world, what with the “no doc” loans, borrowers with FICO scores lower than their bowling scores and 0% down.

But things are mostly back to normal in regards to lending requirements. And rates are great. My friend and colleague, Christie Caldwell, sent out these rates a couple of hours ago.

Assuming a purchase price of $250,000 rates looked something like this, using the FICO/LTV/Interest Rate model:

• 680/95%/5.50%
• 680/90%/5.50%
• 680/80%/6.00%

• 700/95%/5.50%
• 700/90%/5.50%
• 700/80%/5.875%

• 720/95%/5.375%
• 720/90%/5.375%
• 720/80%/5.50%

• 740/95%/5.375%
• 740/90%/5.375%
• 740/80%/5.50%

If your FICO is below 680, you can still get a loan, but you’ll be looking at paying more for ‘points’. And a gold star to the first one to see where things may seem a bit odd in this. [HINT: put down more, pay higher rate?]

Keep in mind that rates can change frequently. As in, several times a day. But these are good guidelines for where things are in general. Also, a borrower’s rate will be impacted by the amount financed, debt/income ratio, etc.,

Again, these numbers are a guide for today. Around noon. Before I go get another cup of coffee.

Just know that the torrential downpour of news items covering the firestorm of controversy about the credit meltdown may be missing some of the facts regarding mortgages.