What’s The Rate?
March 25th, 2011 categories: Buyer Resource, Mortgage Rates
I am asked many questions as a guy who’s been in lending for over 22 years, but none more often than, “What’s the rate?” I have learned to make peace with the question, but I used to absolutely hate it. Why? The answer is simple; there is no such thing as “the” rate.
I am not trying to 
be arguemenitive. Bill Clinton, when asked if he was having an affair with Monica Lewinsky said, “There is nothing improper going on between myself and Ms. Lewinsky.” Later when questioned by the Grand Jury he said he had not lied because it depends on what you mean by “is.”
“What’s the rate today” Well much Like Predisdent Clinton, it depends on the meaning of “is.” You see the rate is constantly changing minute by minute day by day, Monday through Friday. The mortgage interest rates are determined by the appetite investors have for treasury bills and bonds. Since the market is constantly moving/trading as investors put money in or take money out of these markets, the rates change constantly.
Boring Dave! What’s the rate! Ok, maybe it would help if you understood what a typical loan officer goes through each day. A typical day looks like this.
Lou Loanguy wakes up and runs to the TV and checks the market to see the direction of rates and then makes coffee. (Yes, in that order.) When he gets to the office he checks the first rate sheet that comes in to see where rates will start out. He gets a call from a client and is asked about the rates. As he is answering the question, the rates are changing in small degrees as those crazy investors put money in and take money out of the credit markets. Once there is a decisive move in a direction, we get an actual rate sheet update.
As soon as Lou gets settled into his day, there is an email bulletin, “Rates changing!” Over the next thirty minutes all the lenders re-price as the treasury market changes direction or moves further in the direction of the morning. This goes on all day until Lou is ready to scream. You see what he quoted the client just a few hours ago is now different and if that client calls and wants to lock in the rate, Lou will have to explain why he can’t offer that rate anymore.
This goes on each day until Mr. Loanguy gets a facial tick at the sound of any word that rhymes with rate. You see the reality is, until you lock your loan, it doesn’t matter what is being quoted. What you get and what is quoted may be totally different.
To even further exasperate the situation, some Loan Officers will quote low just to, (let’s be nice here), get the business. Since what a loan person quotes is going to change anyway, some Loan Officers will quote low to get the deal and then bring the borrower to the market when it’s time to lock.
So what’s the rate? The rate is what ends up on your documents. How can you find out what that will be? You have to ask more than, “What’s the rate.”
What is your lock policy?
What if rates go down after I lock?
When can I lock?
Hot tip! If a loan person quotes you a rate, but then says you can’t lock until your loan is approved, or they have the appraisal in, or some other excuse not to lock you, they are quoting a rate that they can’t deliver. What should you do in that case? Find a new loan officer.
I have explained all that to borrowers countless times. You know what they usually say back? “Ok, what is the rate?” Then my face twitches and I go have another cup of coffee.
This article was contributed by:
Dave Raffi
707.303.2933
MISSION HILLS MORTGAGE
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