You probably already know that advertised mortgage rates might not match the quotes that you get from lenders. An advertisement may only be valid for a few people or for a short time; a custom rate quote is based on your loan amount and property value, your credit score, the property type and its use. But wait; there’s more: did you know that a mortgage refinance might come with a different rate than a purchase loan? It’s true.
Refinance = Ugly Mortgage Stepchild
Mortgage lenders are operating at or very near their full capacity, for several reasons. First, government programs like HARP, the Home Affordable Refinance Program, have enabled more people to refinance, and given them a deadline in which to do it. In addition, new regulations have increased the time it takes to underwrite, process and fund a mortgage. Finally, there’s the economy, which has pushed rates to new lows, fuelling the demand for refinancing.
When mortgage lenders are working as fast as they can, many of them move new purchase applications to the front of the line, ahead of the full pipeline of refinance applications. Purchases, unlike refinances, come with deadlines. Lenders don't want new customers to fall out of escrow when their closings are delayed. In addition, real estate agents can influence their clients' choice of lenders – it doesn’t pay to cause anyone to lose a sale.
Some Lenders Buy Time – With YOUR Money!
Because some lenders don’t want their refinancing borrowers coming unglued when their 30-day rate locks expire, they offer "free" 90-day mortgage rate locks. These extended locks cost lenders more, however, so, while some absorb the higher costs, others charge higher mortgage rates for refinances than for purchases.
Comparing Refinance Rates the Right Way
When you get refinance quotes from competing lenders, make sure that they’re going head-to-head in pursuit of your business. The lender with the best mortgage rates may not be the one for you if the quote is good for only 30 days and it takes them 90 to close your refinance.