Timing - mortgage rate

Written by Posted On Thursday, 26 May 2022 00:00

Getting competitive interest rate quotes is not only necessary in order for you to get a good mortgage rate but it's also a matter of timing. How so? To understand this factor you also need to know how mortgage lenders set their mortgage rates each and every day. And they do set them each and every day. Rates are issued by a mortgage lender's 'secondary' department which is in charge of a variety of functions including selling mortgage loans. But as it relates to rates, lenders will typically issue their daily mortgage rates early in the morning after markets open.

These daily rate moves are tied to specific indices based upon the type of mortgage program being issued. For example, a 30 year fixed rate might be tied to one index while an adjustable mortgage rate will be tied to another. As these indices move up or down, mortgage rates will react accordingly. Lenders pretty much use the same set of indices which explains why all mortgage lenders have remarkably similiar daily interest rates. You won't find one lender with a 2.00% 30 year rate while the next lender is at 4.00% on the very same program.

Okay, let's talk about timing. When you begin your search for lenders you can probably start online to get a general idea of where rates currently stand but at some point you'll need to make direct contact with these lenders. Besides, online rate data can be deemed 'old' the moment it's posted online. Because markets are dynamic, these rates can change. Don't get rate quotes from a few lenders in the morning and later on in the afternoon get other quotes. Markets may have changed from the morning to later in the day without your knowing. If the afternoon lenders appear to be much different than your morning queries, it's likely the case for all lenders. That's why timing is so important. 

When getting rate quotes, make sure you're getting them at the same time of day. 

Also, make sure you're getting rate quotes for the same type of loan program. You really can't compare whether rates are higher or lower when comparing a 15 year fixed loan with a 30. They're going to be different. 15 year rates will typically be a little lower than a 30 year note but due to the relative compressed nature of a 15, the payments will also be higher. At the same time, make sure you mention your estimated loan amount for these quotes. Smaller loan amounts might require a premium compared to a larger one.

So, with all this information, what is the proper way to compare lender's rates? It goes something like this, "Hi, I'd like to get a rate quote for a $300,000 loan amount using a 30 year term for a 30 day lock period."

The lock period is important because the longer a rate is held, the mortgage lender will charge more. A 15-day lock will be slightly lower than a 30 day. Like with all other variables, make sure you're properly comparing apples to apples.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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