Interest rates rising? Lender increased rate quote.
We’ve been working with a lender for about 6 months to finance my first home. We are in a unique situation as we are buying a home out of a rent to own agreement. The first 4-5 months I worked with an inexperienced loan officer who did not know how to structure the loan. About a month ago we were given a more experienced loan officer and things are progressing nicely. At the beginning of the process we were quoted a rate of 2.71% on a 30 year fixed and now that I have been approved for the loan, I am being quoted 3.6%. The change had not been discussed, it was just presented in the disclosures.
As a first time homebuyer, I’m not sure how to interpret this. I keep reading in the news that interest rates are not going up or have gone up by 0.1% and the splash page on their website continues to say the rate on a 30 year fixed is 2.69%. I brought it up and my officer who has been great simply said “ the rates have gone up” and when I said I didn’t see evidence of that she said she’d speak with her higher up to see what they could do. She has been very attentive throughout the process and now has become difficult to reach for much of the past week.
Can anyone offer me some insight here? Is this rate change normal or am I being taken advantage of. Is there a reason she may be avoiding contact with me? Do I have any recourse with this rate change or is it what it is and I should just deal with it?
Thank you for your help!
Hi Catherine,
I'm both an LO and investor so I'm seeing both sides.. here's my 2 cents:
1. As of today, the interest rates are higher than it was couple months ago and pretty much the last 2 years of Covid. When they quote you they did not lock the rate, henced why it changes when you see the disclosures. They're in the wrong for not even letting you know of the interest rate changes and at almost 1% higher too! When they quote you, they will sell you the roses and hide all the thorns. If you want a clearer picture of how mortgage interest rates are doing, you can follow the 10 yr treasury yield, typically mortgage rates follow the 10 yr treasury yield and it's been a wild ride since Covid. The rate can change in a day so when the LO's give you a quote in the morning it can be different in the afternoon, nothing is certain unless the rate is locked for a certain time, usually 30, 60 or 90 days.
2. When you go to any lender's websites, they will sell you the low interest rates, and then there's a "APR" rate next to it and then there's the disclosures for getting that "low interest rate". (For example: 2.69%/ 3.35% APR )The APR rate is typically higher because it involves the "cost" of getting the lower interest rate (2.69%). The cost includes points, closing costs,.. You can see it as a marketing attempt to lure borrower's in by selling the low interest rate. This then brings you to the disclosures section where the lenders by law have to lay out the terms and conditions to qualify for that low interest rate. For example, the disclosures on the web discloses term 30 yrs, credit score min 700, loan size 300k+, primary home, single family residence...
3. When you do a refinance/ purchases be wary of the fees from the beginning. It is a tricky area that lenders tend to hide and surprise you at the end. By then you'd be so over it and just wanted it to be done with so you sign and that's how they get you. First, know what is the lender/origination fee is. This is the fee that the lender charge you to do the loan, to pay for their processors/underwriters... Second, is the third-party closing costs (title, appraisal, escrow, notary fees, recording fees, etc.) ... Third and lastly is the Points/ Discount Points/ Buy Down Fees - so when you are being quoted, know that the mortgage par rate (free interest rate) given to you involves no points and therefore no cost to you. If you wanted a lower interest rate than the par rate offered, that's when you are buying down the interest rate. With that you are paying for an upfront fee for the lower interest rate. If you're wondering if it's worth buying down the interest rate, consider this, are you planning to sell the house within the next couple years? If yes or if you're uncertain, then don't buy the interest rate down.
And to answer your questions:
Is this rate change normal or am I being taken advantage of? Interest rate changes are normal, just like the stock market they are volatile. We can't time the market, but we can take advantage of its low point.
Is there a reason she may be avoiding contact with me? there could be many reasons why she's not contacting you; one reason could be because she couldn't offer you the quoted interest rate or even lowering it down close to the quoted rate
Do I have any recourse with this rate change or is it what it is and I should just deal with it? I say, if you have time, shop around a couple of lenders and get them to compete for your business. You can DM me if you have any more questions. Good luck! :)
@Catherine M...sorry that's happening and ditto to @Diana Van detailed response. To piggyback and give some $0.02 of my own, being a mortgage broker in CA, rates have gone up and over the last few weeks especially have been somewhat repriced for the worse. However your loan officer should be discussing these things with you as they happen and have more transparency than "rates have gone up" (deal with it attitude) - you should know that they're not locking when you're getting into application, that you run the risk of rates increasing, etc...I can only speak of what you're mentioning.
Given that the loan was not locked, there's really no recourse, unless you want to get another quote(s) elsewhere and see if it's possible to be better. Hope that helps!
