Lenders! Share with us those magic numbers!

[Daniel Y.]

We all hear about those great rates being advertised on TV, the radio, and those annoying ads on any social media platform because EVERYONE is tracking you. You hear or see the "30 years fix rate at 2.75%! Call now!" or something close to that.

Given that rates will vary depending on so many factors, such as credit score, DTI, etc. I would like to know, and I am sure many other people would like to know as well, what factors will give us the best rate?

What do I mean?

I know borrowing at a 60% LTV will give you a really good rate. Are there any other points between 60% and 80% LTV that will trigger a different rate tier? We know borrowing over 80% will trigger getting PMI for conventional.

Can you trigger a better rate if you borrow less than 60% LTV?

What about loan amounts? I know a lot of lenders do not lender under 50k and if you go into the jumbo loan range in your area, the rates starts going up. So what is that happy number that will work best nationwide? 200k, 300k, 400k+?

[Chris Mason]

Originally posted by @Tom S.:

@Daniel Y.   I know of two people in CA that used Ocwen Corp and they received the advertised rate of 1.875% for a 15 year fixed.  Not hearsay, they showed me the actual loan docs because they were so excited!

That said, this was a few months ago and rates have moved up slightly. They both had solid income and W2 jobs, fico >760, and the loan had to be 1st position owner occupied, total LTV < 40%. The company loans in CA only to my knowledge.

Hope that helps!

 That's super awesome for your friends. Most people don't qualify for 15YF b/c the payment is so much higher. So the strategy is basically advertise the 15YF at a rate that's in the negative profit zone, knowing that 49 in 50 people that call won't qualify, switch that 49 over to a 30YF ("oh sorry Mr. Consumer, this was totally unexpected, no way we could have foreseen this, totally a surprise, but let's talk about a 30YF"), surcharge them a bit on the 30YF (what they do qualify for), to subsidize the very small minority actually getting the 15YF. They do have to actually offer something, if they advertise it, so that's how they balance it out. You pick some scenario that most people won't qualify for, advertise that, knowing you will lose money on that minority of transactions, and jack up the pricing on the commodity stuff that normal people actually qualify for, to make up for it. That price bump covers the marketing budget, as well as the losses from the unicorns. So, yeah, if you ARE that unicorn, it's a great deal. 

Another common strategy with internet advertising is to bury high fees in the small print, and/or use a wonky down payment, or something else that no one ACTUALLY does. 74.91% LTV corresponds to a down payment of 25.09%. Not 25% down, not 20% down, 25.09%. So unless you're going to call and say "hello, I would like to put 25.09% down on a home purchase," the terms/fees/apr/etc advertised aren't applicable to you and need not be honored (it goes without saying that "Joe Consumer" isn't going to click on "legal disclosures" in size 5 font at the bottom to read the below snip, so "Joe Consumer" would never know that 25.09% is the magic code to get what was advertised).

I could go on, but basically there's no way to advertise rates online and be honest about it. If you're honest and straightforward, not manipulating anything, not doing anything funky, then it simply will not be effective marketing (b/c the competitor who is being manipulative is going to put prettier numbers up, so that's who gets the business). So, sometimes, "the only winning move is not to play." - War Games, 1983 film. That's both why I don't put rates online AND why you see all these threads about bait-and-switch tactics. It's the consumers and mortgage professionals that deserve each other, to an extent, more or less. The amount of time spent going round-and-round on trying to get what was advertised, and the other party going round-and-round on trying to avoid offering what was advertised, is a giant time suck. I could probably do 3 or 5 straightforward loans in the same amount of time spent on that back-and-forth for one of those. Consumer-facing marketing for mortgage stuff, and everything that naturally follows from it with that business model, is more or less a dumpster fire, in these United States.