The media has been going haywire talking about the great 4% mortgage rate. While rates are extremely low, actually getting a 4% mortgage rate is something else entirely.

The average interest rate people are locking in on 30 year fixed-rate money is between 4.25-4.375%. Why the disparity?

Well the interest rates advertised by Fannie Mae and Freddie Mac are an average rate based upon having pristine credit, 25% down (or 25% home equity), very low debt to income ratios and clean as a whistle financial profile.

Why are folks not locking in the 4% mortgage rate?

Relative to the big picture, there is a very small percentage of borrowers ready willing and able to secure mortgage financing today that match this description. If any one of these credit components are off by a hair…. then the interest rate is affected.

Another factor to consider is mortgage volume is up nationwide. When rates drop and the media outlets announces a 4% mortgage rate, mortgage lenders get busy.

Extremely Busy… almost overnight.

Mortgage lenders have a certain volume capacity parameters. These parameters are dictated by market indicators, like interest rate fluctuation.

The 4% mortgage rate now starts to look like 4.25%.

To control both refinance and purchase mortgage volume, mortgage lenders simply adjust their mortgage pricing ie their rates based upon pull-thru ratios, lock volume and a loan approvals. In a down economy, lenders staff to handle normal volume, when that volume is exceeded, via low mortgage rates, they can become understaffed quickly and must shift capacity to handle the increased business.

Banks will make more because they know that majority of people refinance even if the rate is 4.25%, due to the borrower’s credit package or industry volume. It’s a way for mortgage lenders to be able to handle the increased volume, while at same time, helping the consumer obtain a low mortgage rate.

This is why the 4% mortgage rate doesn’t apply to masses. If you are thinking about getting a mortgage rate at or around 4%, visit our online mortgage rate quote. Let us show you our competitive market advantage. We can discuss the 4% mortgage rate for your next home loan.