Who gets the best rates?
Lenders regularly publish mortgage rates but they may not be available for all buyers.
Imagine, the mortgage payment based on an advertised rate influenced a buyer to make an offer on a home. After negotiating a contract, this buyer makes a loan application and finds out, that for any number of possible reasons, the best rates isn't available.
Even if the buyers does financially qualify for a loan at a higher interest rate, it will not be the payment that the buyer expected when the contract was negotiated.
Lenders evaluate several factors such as the borrower’s credit score, debt-to-income and loan-to-value ratios. These variables are used to assess the risk associated with the repayment of the loan.
While mortgage money is a commodity, it isn’t priced the same way items are that involve cash for goods. The lender puts up the money today based on a promise from the borrower to repay over a long term, possibly up to thirty years.
The simple solution to avoid surprises such as the one described here is to get pre-approved at the beginning of the home search process. This will ensure you know exactly where you stand when its time to start putting in offers on available homes.
I recommend avoiding the pre-qualifications which only completes a small portion of the loan process. A pre-qualification does not hold as much weight as a pre-approval especially in a competitive market where a seller has many offers to choose from.
Contact me if you’d like a recommendation of a trusted mortgage professional.
Keep up to date on the Denver / Aurora market at https://www.facebook.com/tomjohnsonrealtor/