With rates at their lowest in years we are now getting bombarded by questions of why borrowers can't get the rates advertised in the paper.  Well unfortunately that's a two part question. The first part is that in order to get the rates offered in the paper you would have had to lock in that rate on either Tuesday or Wednesday as rates change daily, sometimes within the day, and rates have to be turned in to the paper in order to meet the deadline to get in the paper for the weekend.

The second and more important reason is that Fannie Mae and Freddie Mac implemented price level adjustments for all conventional loans during the first quarter of last year and are expected to increase those adjustments beginning April 1st.    Currently if your credit score is greater than 740 or if you put down more than 30% you would get what is described as the current market rate. However, as your credit score drops below the 740 mark and you put less than 30% down your rate begins to escalate.  See the matrix below for specific examples.

Credit Score                          Rate

740+                                      5%

700-739                                 5.25%

680-699                                 5.5%

640-679                                 6.125%

620-639                                 6.375%

{above rates are for informational purposes only and do not represent current market rates.  For current rates and to obtain a true cost of your mortgage contact your mortgage professional for a Good Faith Estimate (GFE) and Truth in Lending (TIL) for a Good Faith Estimate Email us here, with your estimated sales price/value and estimated balance.}

One option that you do have is you can pay points (points usually equal a percentage of your loan amount, ie.1 point on a $100,000 loan equals $1,000) to get your interest rate down. Now I'm not a huge fan of paying points as it usually takes you approximately five years to recoup the money you spent to buy down the rate based upon the monthly savings acquired.  For example, if you were to spend $1000 extra to buy the rate down .25% (normal spread in rate with 1% buy down) then you would save $15.59 per month and it would take you 64 months to break even.

Now if you have one of the above credit scores, it's quite possible that you could spend that same $1000 and buy it down .5% which would increase your savings by approximately $31 per month, based upon the above example, would only take you 32 months to recoup your extra $1000, and if your going to be in the house more than three years it might be something worth exploring.

You need to fully explore all your options before you spend extra money just to lower your rate. Make sure you understand, don't pay extra until you're sure you understand.

I've added a link below to an recent article from CBS Marketwatch that addresses some of things I've mentioned above. As always I have no affiliation with CBS, nor endorse them, I'm just providing a link to the article for informational purposes only.

CBS Marketwatch Article