Current Fixed Rate: Who Can you Trust for Real Rate Information?

You would be hard pressed to find a mortgage or financial website out there that does not have current fixed rates on it. But where are they getting their data and who can you trust?

Well a rate quote comes in 3 different groups. One is a bait and switch rate. The second is an honest but overpriced rate. And the third is another party reporting what the current fixed rate is.

A bait and switch rate quote is one that is so low there is absolutely no chance of you ever closing your mortgage at that rate. It is used only to get the phone to ring. You know the old saying, “if it sounds too good to be true, then it probably is.” That is a bait and switch rate.

After they get you to call with their ridiculously low rate, they have you sign the mortgage loan application and everything seems fine. You think the rate on your paperwork is the rate you will get. Then you show up for the closing and the rate is much higher. You say you want the rate on your loan application and they tell you that it was “just an estimate” and things had changed. They usually try to blame it on you or your situation and because you do not have all the information they have, it sounds very convincing. They also try to bond with you in the beginning so when they have to explain later the higher rate, you feel obligated and almost bullied to close anyway.

And yes, the rate will always change at the closing. There is no way you will end up with that low rate. You may be wondering how they ever close a mortgage if no one gets what they want. If you are buying a new home and you already sold your old one, you are basically homeless. You sign because you feel you have no choice. If it is a refinance, you may feel bullied, scared, confused, and that is precisely how the loan officer wants you to feel. Then they can use their sale training to convince you to sign anyway.

The bait and switch mortgage companies have a saying, “throw everything up on the wall and see what sticks.” They know some people will walk away but most will go ahead and sign.

The honest but overpriced rate quotes are mostly from banks like the one you have your checking account with. They rely on the trust of their big name to get you in the door not a low rate. But just because they are honest about the rate does not mean you have to take that higher rate.

The third is a survey of different companies to report current rate data. Most of these are only as good as the companies they survey. If they survey a bait and switch operation, then the rates will be artificially low. One website out there will give you closed mortgage rate data. This is not what companies are advertising but what people like you and I actually closed at. You can find that data at hsh.com.

But that doesn’t really help if you are looking for current fixed rates. If the low rates are bogus and the higher rates are too high, then how do you find good data?

Go to hsh.com and look up 30 year fixed rates. You get the rate that everyone is closing with for that week. Now, subtract a half a percent from that number. For example, if the hsh rate is 6.75%, then subtract .50% from that and you get 6.25%. That is pretty close to what real fixed rates are.

Now, you can see how the bait and switch companies do it. They advertise 6.25% knowing they will eventually close you at 6.75%.

Originating mortgage companies whether that is a broker or a bank make extra money when you close at a higher rate than the real rate. The higher the rate, the more money they make. Your goal is to get the lowest rate and their goal is to sell you the highest rate and they have all the advantages. You are not privy to the information they have so you never know if your rate is the lowest it can be.

To get the best rate on your mortgage, you have to first find out what the real rate is without any markup from the originating company. Then, you have to negotiate the lowest compensation to them which means the lowest rate for you. This will not be with a bank. They have overhead and will not be able to come down in the rate because that would mean they just lost two thirds of their profit.

But you can definitely negotiate with a broker. For example, you would pay a 1% origination fee with no extra markup on the current fixed rate. When you do that, you just got a mortgage that was two thirds cheaper than everyone else in America. Not bad!

Good Luck!