Why are the lowest mortgage rates so hard to capture? 

Complex mortgage applications may add costs to getting a loan.

Real deal or just a mirage?

So simple it would seem. Every online mortgage ad you read, listen to on the radio or see on television makes your heart go pitter-patter just a bit more than the last super-low-rate stored into your memory bank.

But why are things so wildly different from lender to lender when it comes to something so simple as loan program availability?

And, what about those mandates and restrictions when your lender says it has what you want? Are your credit scores high enough? Did you contemplate a forbearance? Who is paying you and how are you being paid? Does your total house payment plus your monthly recurring bills exceed our very conservative income and debt ratios? Are you in a COVID-19 affected industry?

Talk about conditional love!

Mortgage shopping can be exhausting because there are so many moving parts to mortgage pricing, program availability and down payment requirements.

As you start meandering through the mortgage minefield for the best mortgage price and an acceptable underwriting fit, it’s best if you start by playing detective. First determine your purpose, income, credit file and the like.

Then, ask a lot of questions starting with: Do you have a fit for my mortgage needs?

The most frequent complaint I get from column readers is that advertised super-low rates tend to be limited to borrowers with 40% or more equity, high credit scores and larger loan sizes.

Once you are lucky enough to find the mortgage you want (no small accomplishment), beware of these potential markups:

  1. Fannie and Freddie refinance adverse market fee of one-half point for funded loans delivered to F & F starting Dec. 1. Some lenders have already added the fee. Many others will be adding it on Oct. 1.
  2. Some lenders are using risk-based COVID grids. For example, for loans based on assets like bank, stock and retirement accounts or for those with declining income, borrowers may have a larger down payment or get less from a cash-out refinance.
  3. Self-employed borrowers, borrowers with multiple tax returns (including corporate and partnership returns) and multiple properties may get a rate that’s 0.25% higher or a fee of up to 1.5 points because it takes much more time to underwrite such complex loans. Some lenders just say no to applicants with complex and time-consuming mortgage credit packages.

Once you are ready to lock down a rate, same day lender comparisons matter most. Mortgage rates go up, down or they can stay the same, day-to-day.

Most lenders continue to put purchase borrowers in the VIP line. It’s fair to say purchases are taking 30 days or less. Refinances can take 60 to 90 days or more. You need to ask your mortgage loan originator what his or her turn times are and inquire about rate lock extensions. Who pays if the loan isn’t funded in time?

Something else. Mortgage industry workers are feeling like CPA’s during tax season. Overworked and largely exhausted since rates have been obscenely low since March.

Underwriting mistakes are happening that may be generating mistaken credit denials. If this happens to you or something doesn’t seem right to you, ask your mortgage loan originator to retrace the steps in the loan file. Lenders are very good about owning their errors and fixing them.


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Jeff Lazerson - Mortgage Columnist since 2011