As we head into the last two weeks of 2020, and rates continue to be low, Orion thinks that it is important for our broker clients to know why different mortgage rates exist for different borrowers. We believe that it is important for your clients to understand the reasons, and they have nothing to do with politics!
It really comes down to the perceived underlying risk on that loan. The subject property and the borrower will always have unique characteristics, but even identical scenarios will be priced differently by different lenders and investors. For every borrower, thousands of different brokers, banks, lenders, and credit unions compete with one another to offer the lowest rate and/or the best customer service and product. And Orion’s AEs continue to remember that.
Your clients should know that the higher the risk of default, the higher the mortgage rate. Banks and lenders start with a base interest “par” rate and then raise or lower it based on the specific home loan criteria. Other mortgage lenders make many of assumptions when advertising rates, and particular loan scenarios may be quite different than the hypothetical. Orion believes in discussing the scenario with your client in order to best understand the rate and price for them. There are loan pricing adjustments for things like loan amount (conforming or jumbo), documentation (full, bank statements, etc.), credit score, occupancy (primary, vacation, investment), state, loan purpose (purchase or refinance), debt-to-income ratio, property type (single-family home, condo, multi-unit) and LTV or CLTV. And more, as experienced brokers know.
An individual coming to a broker and purchasing a single-family home with a conforming loan amount, a 20% down payment, and an 800 FICO score is going to qualify for a different rate than the individual requesting cash-out on a three-unit investment property with a 650 FICO. And again, rates will vary from lender to lender, because different lenders want different loans in their portfolio to hold onto or sell into the secondary market, meeting investor appetite. This is why it’s important for our brokers to have their borrowers to understand how risky their particular loan is, and the different rates and products for which they can qualify.
Orion firmly believes that we can offer you the best combination or product, pricing, and service, and our valued broker clients agree. Ask one of our AEs what’s new at Orion!