When you buy a house are the interest rates competitive? Can I get a better rate depending on the bank I pick

Question

Are interest rates based on bank, or are they the same for all banks? I ask because on a local real estate website they have a "todays interest rates" section. Thats a little confusing to me, does that mean its the same no matter where you go?

Answer 1

Interest rates do vary. But if you call reputable lenders they should be fairly close to each other. There are many factors that affect what your rate will be. If your credit is good then you should get the standard market rate that you are seeing where you look.

The things that can affect your rate:

Example:

Credit
Loan Size
Term-length of years

So when someone tells you that you could have gotten a better rate you cannot assume that you can. It's all based on the information in front of the lender and not on what a passerby states.

The most important part to be aware of is are you paying an "origination Fee"? If you are then a institution like my own would be giving you the absolute lowest rate that type of loan offers. If I were not giving you the lowest, that would mean that I am also being paid by the lender by giving you a higher rate along with the "origination fee".

A wholesale lender will generally pay a broker or bank a "Yield Spread Premium" which is a whole other topic, if you raise the rate above the lowest par rate. par rate, meaning if you go below that you would actually have to buy the rate down, that's not a bad thing if it works for you.

Two questions to ask your lender. Is there an origination? Am I paying 1% above the par rate. If you are paying 1% above par rate then you should not be paying an origination. If you are paying an origination, then your rate should be at Par for what their wholesale lender offers them to furnish to you. Usually 1.0% to 1.5% is fair income for the lender of your choice. If they are making more then they are ripping your shirt off.

There are so many variables in this but good luck.

Answer 2

There is a general average interest rate that is the basis for a bank's individual interest rates. What interest rate a bank offers you is based on your credit rating, the type of loan and amount and many other factors. You can certainly shop around for different interest rates, but the other conditions and closing costs are equally important, if not more so. It is also possible to "buy down" your interest rate with points.

I found that the mortgage companies (like Countrywide) were able to give better rates than the banks, but that might not hold true now or in your situation. Definitely shop around and don't forget to get all the info on the terms and conditions of the loan.

Answer 3

The very best way to find a lender is to get a reference from friends, family, neighbors, etc. They usually don't have any reason to hold back on their experience with a lender and will usually give you an honest answer. The least expensive option (lower fees and interest) is with a bank, however they are more conservative with their money and if your finances aren't in shape, they'll likely say no. Brokers can be more expensive, a few hundred to a few thousand dollars depending on your market, but they work with a wide range of investors and mortgage lenders and are likely to get you qualified with at least one of them. Whether you are a first time buyer or not, you can use the FHA loan. They have lower down payments (3%) and are less risky to a lender (government insured). But, they are more expensive and you will pay PMI insurance without puting 20% down. If you can swing it, go 15 years with 20% down, you'll be happy you did. Watch out for variable rates or jumbo loans and don't buy too much house or the house will own you!

Answer 4

Government backed loans are set by the governing agency, I.E. FHA or VA, or a state operated first timer program. Conventional loans are based upon credit worthiness and, for "A" credit are competitive with government loan rates, sometimes even slightly better.

Rather than worry about the rate, worry about the fees and shop a lender with in-house lending capacity, or you will pay unnecessary fees. Get a top real estate agent in your market, they know the ropes and lender to use or avoid. Do not "buy down" the rate it is not worth it, you may move in 3 yrs and you could put the money to better use paying off credit cards or other debt.

I take my homebuyers thru my "Home Buying 101" class and teach them to build their own wealth not a lender's. A top agent will do likewise.

Answer 5

The rate of index used to determine the rate may be the same but that is not usually the rate sold to borrowers. You buy a rate that is spread to the indexs and that can differ greatly depending on the borrower's credit history and the lender. Since in most cases, the bank borrows money to loan you money, the bank has to factor its cost of funds which is built into the rate you get.....it's all kinda complicated but bottom line is that rates differ from lender to lender because the spread to inedx will differ.....I can't make it any simpler than that.....

Answer 6

Rates change daily and will be different from one bank to another for the exact same type of loan. I suggest you use a "Mortgage Broker" who has access to many banks. I for example have over 30 I can use.
Rates also depend on Credit scores, income, total debt including the new house

Answer 7

Competitive.
You need to interview a couple of places. I used the ones who were willing to come to my house and discuss it. I kept a spreadsheet. It's not a simple comparison. Some offered to pay closing costs -- $2500 in my case -- for a higher interest rate. Others had variable rates. It's complex. If you're buying a new home, sometimes the builder has a special financing deal that's the best. Sometimes it's a credit union.

Answer 8

Interest rates are affected by two things: 1. Your credit score and 2. Your down payment. The better the credit score and the higher the down payment, the lower your monthly payment will be. Some banks have better rates than others, but ultimately it boils down to these two. Good Luck.

Answer 9

Your interest rate will be determined by a number of factors, including your credit history. However, the interest rates should be competitive between lenders, and it could possibly hurt your credit to shop around too much.

Your best bet is to learn about the different loan programs (ARMs, fixed rates, etc.) and then compare similar loans between banks.

Good luck!!!

Answer 10

They are basically the same where ever you go. Find an experience Loan Officer who your friends and family trust and highly recommend.