Want to talk about consumer frustration among home buyers?  We’re constantly bombarded by media headlines that tell us that mortgage rates are at an all-time low and we’ll never see rates this good.  Then, those buyers that want to leverage this period call a lender and find out that the rate being quoted is higher than anything seen advertised on the web and in news stories.

So what gives?

Honestly, there are a lot of reasons the rates you’re quoted for a mortgage in Michigan are different than those being advertised.

1. Those Rates for a Mortgage in Michigan Simple Aren’t Real

Depending on the site you’re looking at, the rates you see for a mortgage aren’t honest quotes.  In some cases they are, but they’ve expired or may have a variety of conditions attached to them which only a small handful of borrowers can actually meet.  It’s important to remember that every single resident in southeast Michigan has a unique identity and financial position, and that affects the rate you get on your mortgage.

2. Don’t Forget the Discount Points

When rate surveys are posted, they’re showing you the rates from the previous week posted by Fannie Mae and Freddie Mac.  To get those, you more than likely have to pay discount points.  For example, a Freddie Mac rate survey shows the rate on a 30 year fixed rate mortgage to be 4.10%, but further in the survey it showed that the 30 year fixed rate mortgage carried an average of .8% of a discount point, then a discount of 1.0% can be a .125% – .500% difference in the interest rate.

3. Your Credit Score

Freddie Mac and Fannie Mae rely on loan level pricing adjustments.  If you have a credit score below 740 and your loan to value ratio and your loan to value ratio is greater than 80%, you can expect an adjusted interest rate when you apply for your mortgage in Michigan.  For example, if your credit score is sitting at 700 and your loan to value ratio is 75.01%, then you can expect a loan level pricing adjustment of .75%.  This is an additional fee (points) that has to be paid along with your mortgage.

Since most home buyers don’t pay points on their mortgage, the result ends up being a higher interest rate over the life of your mortgage.

4. Small Loans equate to Different Interest Rates

When you’re researching mortgage rates online, the rates you see are typically for larger home loans.  If you’re mortgaging a smaller home in the southeast Michigan area, such as in Westland or Downriver, you may have a smaller loan amount than a newer home in Northville or Royal Oak.  Larger loans provide a lot more revenue to lenders but don’t cost more to originate than smaller loans.  With this, the lender tend to make more profit even at a lower interest rate.

5. Consider the Location

In real estate, agents often talk about “location, location, location”.  That’s true for southeast Michigan when it comes to mortgage rates as well.  Some lenders follow strict guidelines on mortgage rates depending on the geographic region and demographics.  This can take into account higher default rates for certain communities or higher costs to originate loans within a specific county or region.

This is by no means an all-inclusive list, because other factors come into play as well such as owner-occupancy or investment property,  refinancing vs. purchasing a first time home, buying the wrong type of property, etc.  This can however give you an idea on why you’re not able to get the rock-bottom, absolutely lowest possible rates for your mortgage.  When you’re seeking out a mortgage for your first home in Michigan, make sure you compare rates and talk to multiple, reputable lender or Michigan mortgage banker who can help you find the best rate.