We’ve got some new data that shows why it is so important – especially now – to shop around for the best mortgage rates and terms.
Just take a look at this graph (you can click on it to see a larger version). On the left side, the gray shaded area is pretty small but then it grows bigger on the right hand side. Those gray areas represents the so-called “coupon spread,” which has nothing to do with deals at grocery stores. Instead, it’s a sort of marker to see how mortgage rates that are being reserved for borrowers compare to the loans that are actually funded, or securitized. This essentially reflect the profits pocketed by these originators for your loan transaction.
What this means: Loan originators these days are making a pretty nice profit off of the loans– which means there is room to negotiate on your end for better terms. Now, in order for this to really work in your favor, you have to have the right credit scores. But don’t get discouraged if your credit isn’t perfect. Even if you can’t cajole a sweeter deal, you still are financing with historic low interest rates (They dropped to 4.57% for a 30-year fixed-rate loan this week, according to the latest Freddie Mac Survey).
And before you start to get mad at the loan originators for making big profits, realize that a part of this large gray area on the graph has to do with less lenders being around in the aftermath of the housing meltdown. LendingTree Chief Economist Cameron Findlay says government policies are reshaping the loan industry into something that ideally will remain competitive yet manageable – which means those wide grey areas may not be around forever.
Learn more about what’s going on with these coupon spreads, and what it means for you, by clicking the audio button above from a July 1 interview with Findlay.
- Additional information on coupon spreads can be found on this blog post from Cameron Findlay.
FYI, if you are ready to refinance or get a new home loan, LendingTree can connect you with lenders who will compete for your business.
