First off, refinancing your home is a great decision, interest rates are low and there are many programs available to help homeowners refinance some even without loan-to-value restrictions, see more on the Harp 2 Refinance.
In order to get the lowest possible interest rate, understand there’s two critical components most lenders will typically not sure with you.
Lowest rate is determined by 3 factors, 2 out of 3, given the the weighted average.
- Loan to value-the higher the loan to value the lower the higher the interest rate, consequently the lower the loan to value the lower the interest rate
- Middle credit score-must be 740 or higher
- Market gyration-happens on a daily basis, typically we want to see the negative economic news coming out in the financial markets because that drives investors to put their money in mortgage bonds driving the yield’s in the fixed income market up, the mortgage rate to you the consumer, down. When the stock market is improving, that’s typically coming on the liquidation of bonds, making yields drop causing rates to rise which typically happens when there’s positive economic news, such as the unemployment rate falling, strong consumer confidence etc,
Because no lender has a monopoly on the market, trying to time interest rates becomes nearly impossible because of the fact if you lock the interest rate today, rates improve the following day, by definition the lowest interest rate is always on the next day’s pricing. Lenders will look at a weighted average between the loan to value and your credit score. Put another way, if your loan to value is 75% or lower, and your credit score is 740 or higher, and you can actually qualify for financing, there’s no reason why you shouldn’t be able to get absolutely obtain a super competitive interest rate.
Lenders use what’s called risk based pricing which inflates and how your mortgage pricing will be on your refi. There is incremental pricing adjustments when the credit score is under 740 or when there’s less than 25% equity or combination of the two. This is just a byproduct of what you will inevitably be dealing with in trying to procure the lowest possible interest rate for your unique situation. Every single borrower and financial picture is uniquely different and because of this, there is no blanket interest rate pricing as the media would otherwise have most consumers believe.