Here are the top FAQs/misconceptions I hear from home Buyers on residential mortgage loans.
There is no such thing as parity or even consistent rules amongst lenders. There are retail banks, credit unions, direct institutional lenders, mortgage brokers. Some lenders sell directly to Fannie Mae, Freddie Mac, Penny & Ginnie also known as GSEs. Every lender to some extent underwrites to these GSEs. Then some lenders have their own overlays
Overlays are a lenders rules/restrictions on borrowers. Such as credit score, Debt to income ratio (DTI), loan to value (LTV) - what percentage is the down payment requirement vs loan amount, reserves (savings/cash you have left after you buy), preferred banking relationships (how much in total assets do you have with the bank)
Different lenders offer different loan programs. Some can do 1st/2nd loans on jumbos allowing 89.9% LTV. Some jumbo requirements are less stringent. Some won’t lend on VA 2-4 units. Some have asset depletion models, bridge loans. Some won’t do investor 2-4. Some have bank statement loans and other non QM loans
There is no such thing as parity in rates. You can contact 5 different lenders and get varying rate quotes. I recommend you get them at par so you can compare apples to apples. In volatile times, spreads between lenders can be wider. This changes daily, sometimes intra-day as lenders re-price. ABC lender can be better 1 day, XYZ the next and then they’ll flip flop. Most of the rate surveys you see quoted online, even on FRED are NOT quoted at par. They can quoted in a non standard fashion with points. Meaning 1 lender is quoting X rate with .5 pt, another with 1pt
The Fed doesn’t directly set long term rates. They set the Fed Funds rate, long duration treasuries are set on the open market depending on demand for Treasuries. They influence yields & bond prices by buying or reducing their holdings in bonds including Treasuries & MBS. This is often referred to as QE (quantitative easing) or QT (quantitative tightening). The 30 year mortgage most closely tracks with the 10 year Treasury + a spread. This is due to fact that most home mortgages duration is 10 years or less, with either homeowners selling within 10 years, or they refinance into a different mortgage