Reports on 30-year fixed rate

3 Reasons Why You Might Not Get Freddie Mac’s 3.79% Mortgage Rate

Freddie Mac says mortgage rates are 3.79% nationwide -- an all-time low. Yet, so few people actually get that rate from their lender. What's the real reason why you can't lock Freddie Mac's 3.79% rates? Turns out, there are 3 of them.

For Some, 30-Day Mortgage Rates At 3.79%

Each week, Freddie Mac publishes a national mortgage rate survey. The survey results are based on the mortgage rate responses from roughly 125 banks nationwide. The banks tell Freddie Mac their "going rates" for a 30-year fixed rate mortgage, 15-year fixed rate mortgage and 5-year ARM, and Freddie Mac dutifully reports it to the American People.

Unfortunately, the posted rates make a gross assumption -- they assume a 30-day rate lock agreement between the bank and the customer. And, lately, except for purchase money transactions, 30-day rate lock agreements have been rare.

Few banks are giving 30-day rate locks anymore because it's getting tougher and tougher to close a refinance in 30 days. There are multiple reasons for this, including :

  • Low mortgage rates have created a surge in active mortgage loan applications
  • New federal loan compliance regulations have added extra days to underwriting
  • There are fewer appraisers to service a growing number of  requests, increasing turnaround times from scheduling to completion

In addition, banks employ fewer "back-office" personnel as compared to during other growth cycles. In short, people can only work so fast and today's mortgage applications are subject to thorough vetting process. When loan volume's low, banks work through files quickly.

Volume has not been low in 9 months. Mortgage lenders are working through backlogs as best as they can, but until they're caught up, refinancing homeowners in California, Virginia, and everywhere in between will be forced to take 45-day rate lock or, in some cases, 60-day rate locks. These longer rate locks add to mortgage costs, and push mortgage rates up.

The mortgage rate for a 45-day rate lock is typically 1/8 percent higher than for a comparable 30-day; a 60-day rate lock is often 1/4 percent higher.

This is why it doesn't matter than Freddie Mac says mortgage rates are 3.79% nationwide. If your bank can't close a loan start-to-finish in 30 days, your mortgage rate will be higher no matter what.

Typical Mortgage Rate Adjustments Stymie Shoppers

Another reason why you may not get that Freddie Mac 3.79% mortgage rate is because you're not applying for the basic Freddie Mac loan covered by the survey.

HARP stands for Home Affordable Refinance Program. It's a special mortgage program for underwater homeowners and it's meant to help 7 million U.S. households -- especially those in hard-hit states such as Arizona and Florida. HARP gives homeowners with little or no equity access to today's low mortgage rates. Almost.

As today's HARP applicants are finding out, many mortgage lenders are making small, upward interest rate adjustments on each HARP loan they make. This put the Freddie Mac published rate out of reach.

The same is true for homeowners in "high-cost" parts of the country where jumbo-conforming mortgages are common. Loans above $417,000 but below the maximum conforming loan size limit of $625,500 remain subject to interest rate adjustments that raise mortgage rates off the Freddie Mac all-time lows.

This affects homeowners in Hawaii, New York, the Washington, D.C. area, and nearly all of California.

What Rate Can You Get?

So maybe you've been watching mortgage rates fall this year but you've yet to make a move. This week would be a good time to get that rate quote.

Mortgage rates may drop again next month, but, as we're seeing, that doesn't mean you'll get access to the "lowest rates of all-time". As banks get busy, 45- and 60-day locks will be more common and "real" mortgage rates will rise.

Get started with a rate quote. See what today's low mortgage rates can do for you.