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Introduction
Ashley Hess:
Welcome to The Equitable Bank's Smart Start Podcast. I'm Ashley Hess, Marketing and Digital Media Coordinator at The Equitable Bank. Joining me today are Cara Reese and Gary Rieboldt, Vice Presidents and Senior Loan Officers at The Equitable Bank. You have both been on the podcast before, so you're pros at this point. Tell us a little about your experience in the mortgage industry.
Cara Reese:
I've been in the mortgage industry since 1990, so it has been quite a few years.
Gary Rieboldt:
I've been in the mortgage business since 1976. I started when I was 12.
Ashley:
That gives us about 86 years of combined experience between the two of you, so our listeners are going to get plenty of helpful insight today. We're talking about mortgage rates, what influences them, and what borrowers should understand before they begin shopping for a home.
What Actually Determines Your Mortgage Rate?
Ashley:
What are the biggest factors that affect a borrower's mortgage rate?
Cara:
Credit score is one of the biggest factors. The loan amount, the amount of the down payment, and the overall loan-to-value ratio can also make a difference.
Gary:
Credit score has become one of the most important factors in mortgage pricing. The down payment matters too, and the term of the loan can affect the rate. For example, a 15-year mortgage may be priced differently from a 30-year mortgage. There are a number of pieces that have to be considered together.
Cara:
One size does not fit all when it comes to interest rates.
Gary:
People often begin by asking, 'What's the rate today?' The answer depends on the person and the loan. The goal is not simply to chase a number. It is to understand how rates work and find a loan structure that fits your specific situation.
Why Starting with a Preapproval Matters
Cara:
There is real value in starting with a preapproval before you begin looking for a home. If there is a credit issue, finding it early may give you time to address it before you are ready to make an offer.
I worked with a client whose credit score was lower than she expected. We found a small medical collection on her credit report that she did not know about. She addressed the collection and had it removed, and her score increased by 50 points. We were able to pull an updated credit report before closing, which helped her qualify for a better rate.
Gary:
That is why we like to gather the information early. Once we know the sale price, estimated closing date, credit profile, and loan structure, we can give the customer a much more accurate picture. If something needs attention, we can discuss possible next steps before the pressure of an accepted offer.
Ashley:
Knowing your options ahead of time is important. If you encounter a hurdle, you already understand which tools or adjustments may be available rather than trying to figure everything out at the last minute.
Why the Rate You See Online May Not Be Your Rate
Ashley:
What matters most when determining a rate, and what do people often assume matters?
Cara:
There are too many variables to point to only one. Credit is important, but the closing date can matter too. A loan that is closing in 90 days may be priced differently from one closing much sooner. The loan amount, down payment, and loan-to-value ratio are also part of the equation.
Rates can change from day to day and sometimes during the same day. A rate displayed on a website today may not be available 45 days from now when a buyer has an accepted offer. It may also be based on assumptions that do not match that buyer's situation.
Gary:
Technology makes it easy to check rates, which can be helpful, but a consumer may not know all the assumptions behind the number. An advertised rate may be based on a particular credit score, loan balance, down payment, and closing timeframe. That is why a personal review matters.
The Lowest Rate Is Not Always the Best Overall Option
Ashley:
What do customers and real estate professionals most often misunderstand about rates?
Cara:
Many people assume the lowest rate is automatically the best rate. That is not always the case. A lower rate may come with higher upfront costs or fees. Those additional costs may not make sense depending on how long you plan to keep the home or the loan.
Gary:
When you compare lenders online, it is important to look beyond the rate itself. You need to understand the full cost and the assumptions behind the quote. Two numbers can look different while the overall financial difference is much smaller than it first appears.
Cara:
That is also why a website rate is not one-size-fits-all. A borrower may ask why they cannot receive the advertised rate, but their credit score, closing date, loan amount, or other details may be different from the scenario used online.
The Truth About Down Payments and the 20% Myth
Ashley:
What is something that does not affect a mortgage rate as much as people often think?
Gary:
Down payment is a good example. A borrower with a strong credit score may be able to make a smaller down payment without seeing a major change in rate. On the other hand, someone with excellent credit may put much more money down and expect a dramatically better rate, but it does not always work that way. It is usually the combination of factors that matters.
People also place a lot of emphasis on small differences in rate. An eighth of a percentage point may not be as significant as it first sounds when you consider the full loan structure, the costs, and what works for the borrower.
Cara:
Income and assets are another area people misunderstand. Income and money in the bank are important to the overall qualification process, but they do not necessarily determine the interest rate. A higher income does not automatically result in a lower rate. Credit score and the details of the loan still play a major role.
Ashley:
So the idea that every buyer must put 20% down is another common misconception?
Gary:
Absolutely. Many borrowers can purchase a home with less than 20% down. Mortgage insurance may be required in some situations, but it can be more affordable than people expect. For one recent borrower, putting 10% down and paying a manageable amount of mortgage insurance made more sense than using nearly all of his available cash for a larger down payment. He was able to keep more money in reserve while still choosing a loan that worked for him.
That decision came from discussing the options well before he needed to move forward. There is no benefit in putting your last dollar into the down payment if another structure provides a comparable result and leaves you better prepared for the other costs of homeownership.
Education Makes a Stressful Process Easier
Gary:
Buying a home can be stressful. Timing matters, especially when someone wants to write an offer in a competitive market. If we have already completed the preliminary work, we can answer questions more quickly and help the buyer focus on the offer instead of trying to learn everything about the mortgage at the same time.
Cara:
Education is what customers need in advance. When they understand that rates change and that every situation is different, they are less likely to be surprised or confused by the numbers they see. They know what to expect and can feel more comfortable with the process.
Gary:
A good mortgage professional should take the time to explain how the rate was determined and how the available options fit the customer's goals. That guidance can happen in person or over the phone. The important part is having someone who will look at the full picture with you.
Putting Today's Rates in Perspective
Gary:
The unusually low rates available during the pandemic changed what many people expect a mortgage rate to look like. Historically, those conditions were not typical. The long-term average for a 30-year fixed-rate mortgage since the early 1970s has been above 7%, so it is helpful to look at today's market in a broader context.
The rate matters, but it should not become the only factor in the decision. The home, the payment, and the buyer's overall comfort and affordability matter too. As the saying goes, you marry the house and date the rate. Refinancing may be an option later if rates and the borrower's circumstances make it worthwhile, but the decision to buy should be based on what works today.
Cara:
If you find the right home and the payment is comfortable, waiting solely because you are trying to predict rates may not improve the situation. The home may no longer be available, and there is no certainty about where rates will move next.
How Borrowers Can Strengthen Their Position
Ashley:
What is one step someone can take to put themselves in a stronger position for a mortgage rate?
Gary:
Start early. If you pay down debt or correct something on your credit report, the change may take one or two reporting cycles to appear. It is not always instantaneous.
Keeping credit card balances low compared with the available credit can help. It is also wise to be thoughtful about opening new accounts or taking on new debt while preparing to buy a home. Mortgage-related inquiries are treated differently from unrelated new credit activity, and your lender can explain how the timing may affect your application.
Life still happens. Sometimes you need to replace a car or handle another expense. The goal is not perfection. It is to understand how those decisions may affect your options and work with someone who can help you plan around them.
Final Takeaway
Ashley:
The biggest takeaway is that a mortgage rate is not simply a number posted online. It reflects your credit, the loan structure, the closing timeline, the associated costs, and your individual goals. Starting early and asking questions can help you understand your options and move forward with more confidence.
Cara and Gary, thank you both for sharing your experience and insight with us today. And thank you to everyone who joined us. We hope you'll join us again for the next episode of The Smart Start Podcast.
Cara Reese | VP, Senior Loan Officer | NMLS #526252
Gary Rieboldt | VP, Senior Loan Officer | NMLS #526253