Deciding to buy in this market is a fairly simple decision; it’s still technically a buyer’s market, many experts are agreeing that we’ve finally hit the lowest prices and will now be increasing, and banks are still offering low interest rates. Figuring out just how low of an interest rate you can find can be the more difficult mission. So how do lenders price their rates? And how frequently do you need to check in on these rates? Here are some of the answers you’re looking for:

If you’re calling lenders sporadically, trying to figure out which interest rate is the lowest, you may be confusing yourself on exactly which lender is offering what. Your choice of interest rates may vary day to day, and may be similar or identical to the rates of competitors. Loan officers are given rate sheets from their company every morning, numbers which come from the wholesale lenders. These rates are sent confidentially and are not to be exposed to the borrowers, since the rates are the cost to the lender, not the cost to the borrower. On unstable or unpredictable days, loan officers may be sent revision rates every hour.

Different loans have different costs; higher rates are less costly than lower rates. This makes sense, since the wholesale lender will be earning more over the course of the loan in interest. As a buyer, you’ll want to evaluate the amount you would be spending over the course of the loan and see if it’s more valuable to you to pay more points for a lower interest rate, or to pay less for a higher one. It’s important to take your expected length of stay into consideration. If you think you’ll only be living in this home for five years or less, calculate your costs based on the five years only.

Some loans are actually priced at zero or less points. A zero point loan is called “par” pricing. And how are loans priced at less than zero points? Those loans are considered to be “premium” or “rebate” pricing, where the loan officer and lender will actually be paid back for originating a loan at such a high interest rate.

Loan officers will give you the pricing based on the amount they add to the wholesale price. This amount is what the lender and loan officer split in the form of commission (minus any fees associated with the loan). Once you finally discover you can negotiate with most lenders, you can proceed to lock in your rate and start looking for at Denver Colorado homes for sale!

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