The Secret To Finding The BEST Interest Rate

Last Thursday I had lunch with my good friend Paul. During the course of our conversation he asked what most people ask me about. He asked me about interest rates.

Often a stranger won’t ask me about rates, for fear of getting overwhelmed with ‘sales talk’ about mortgages. Paul happens to know that’s not my way, so he asked. What I told him I later summarized below, ‘How to Find the Best Interest Rate.’ My answer may surprise you.

The Best Interest Rate

Don’t Shop Until They Drop

Looking for the lowest interest rate seems awfully easy, doesn’t it? “What’s your interest rate?” sounds like such a straightforward question. If it were true you would be able to jump on the Internet and easily look up interest rates offered by mortgage companies without any problem. But it’s not that simple.

Yet most people spend more time looking for a comfortable pair of shoes than they spend looking for a mortgage that best meets their needs.

It’s just not that simple. Like the great variety of shoe styles and sizes, there are many different factors that can affect a person’s ability to qualify for a mortgage. If you’ve ever been frustrated with finding a pair of shoes that fit you just right, you can well imagine the difficulty in finding a mortgage with a perfect fit. It isn’t just a matter of looking for a pair in your size.

Here’s how it works, from a lender’s perspective.

Over time we’ve discovered common themes associated with why people do not completely pay back the money they borrow. Let’s call them “risk factors.” What are the common risk factors? Credit score, debt-to-income ratio, occupancy type, and loan-to-value ratio. Other factors include being a first-time homeowner, property type, and location of property.

Quite simply if a person doesn’t meet all risk factors for a loan, the interest rate is increased. The worse the risk, the higher the interest rate.

Complicating matters further is that different lenders have slightly different loan qualifications, or underwriting, guidelines. What you may not realize is that different lenders cater to people with different risk factors. Just because the bank down the street won’t give you a mortgage does not mean that another lender won’t.

Risks are summarized in complex tables, called rate sheets. Since there is no standard for rate sheets, every lender has a different format. Oh, and by the way, rate sheets are updated sometimes more than once a day. What we mortgage consultants and loan officers have to do when “pricing out a mortgage” (figuring out an interest rate) is to check rate sheets for the many different mortgage programs from over 130 different lenders against the qualification of the person and the property.

Many people will tell you to compare loans before making a choice. The easy part is asking for a quote. The hard part is having two or more loan quotes based on the same list of assumptions and having a quote be made at the same point in time. With rate sheets constantly being updated, a low rate today may be a very high rate tomorrow.

Expect that when you call for an interest rate quote you won’t be guaranteed an interest rate. You’ll get, at best, wishful thinking. Lenders who will give out quotes have to make educated guesses. It not only takes a lot of time to do a thorough investigation of all possible loans, but also because interest rates are a moving target.

Some people might even quote you a low rate just to get you to stop looking and work with them.

It’s similar to calling up a number of shoe stores and asking if they had white tennis shoes in a size 8. Of course they do! A salesperson will assure you that your hunt is over. They have many white tennis shoes in size 8 on sale. How convenient! Yet when you finally try them on, none of them fit. They’re all too narrow.

Rather than trying to find the lowest rate on a mortgage that you qualify for, why not allow us to find a mortgage that fits you as well as your favorite pair of shoes? We will find you the best loan for your unique situation, taking into consideration your income, other debt, credit history, and other factors.

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Mark Fidgett | 604-273-2002