Mortgage Loan - Pricing Adjustments

When borrowers start shopping for a mortgage loan and they contact lenders or mortgage brokers – the first question that usually comes up is: “What interest rate can you offer me?” This is like asking how deep is the ocean?

Usually large lenders/banks such as Chase, Bank of America, Wells Fargo, etc. will advertise the lowest rate to generate many inquires from prospective borrowers. These rates are actual true rates that they offer, but if you read the fine print, you will notice all the requirements in order to receive the advertised rate.

Borrowers will normally also visit mortgage websites that will show the average interest rate, which can give borrowers a ball-park idea on where rates are in order to be able to estimate a mortgage payment. However, keep in mind that, there is No one-size fits-all rate.

There are actually a few things that go into the rate pricing. Below are some of the pricing adjustments that all lenders and mortgage brokers utilize:

Pricing Adjustments

  • Loan type: Conventional, FHA, VA
  • Conforming Loan
  • High balance loan
  • Jumbo loan
  • Loan amount
  • Credit FICO Score
  • Rate lock period: 30, 45, 60, 90, 120 days
  • LTV (Loan-to-value)
  • Occupancy type: Primary, Secondary, Investment
  • Property type: Single Family, condo/townhouse
  • Multiple-Unit property: 2-unit or 3-4-unit


Underwriting:

  • Fannie Mae
  • Freddie Mac


For refinance:

  • Cash-out
  • Rate/Term

As you can see, it’s not as simple as “here is the rate we can offer you” without even knowing your financial situation.