Mortgage Pitfalls: Explaining Why Published and Advertised Home Loan Rates aren’t Always What You Get

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When was the last time you encountered something that seemed too good to be true? Unless you got lucky, I’m going to go out on a limb and assume that it really was too good to be true. This is often the case in what is advertised to homebuyers

The most common pitfall I encounter as a loan officer among my clients is solely focusing on the rate, and more specifically, the rate that is being advertised. This causes consumers to overlook the fine details, which can be as or even more important than the published rate. However, rates are important, but you need to look deeper than the advertised percentage.

One of the most common questions I receive is, "Why don't I get the rates that I see advertised?" 

First, the super low-interest rates that you see advertised could be for an adjustable rate mortgage, which requires a unique situation to be a good fit. Or, it might be for a 15-year amortization instead of the typical 30-year. I'm a huge advocate of 15-year loans because of the difference in the interest rate and the interest repaid over the life of that loan. This means that over time, you’ll receive a significant discount on a 15-year loan when compared to a 30-year loan. However, 30-year loans tend to be the most affordable. 

Out of the 188 loans that I closed just a couple of years ago, less than 10 percent fit into the perfect package that advertised rates require. That means 90 percent of my customers did not fit into the ideal box for the advertised rates, and you have just a 1 in 10 chance of qualifying for the lowest rate. But why?

The published rate is commonly based on the following: 

• A 740 or better credit score. 
• At least 30 percent down or more. 
• Conventional financing, not FHA, VA, RD, or grant programs.
• A loan amount between $250,000 and $417,000.
• Paying around one discount point to buy that rate, and sometimes more than one. 
• A 30-day rate lock, meaning you must close on or before that 30-day expiration. 

Published rates are almost always lower than what you will qualify for, so plan accordingly and work with a loan officer that will give you the full picture. Stephanie Weeks (that’s me!) and the Weeks Team can bring you up to speed on what you need to know about the following topics:

• Mortgage lending
• How to get preapproved for a home loan (mortgage pre-approval)
• Real estate 
• Down payments
• Mortgage interest rates
• First-time home buyer tips 
• And more!