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We were working with a client to acquire a VA loan in Minnesota when we received a call from the Realtor. The Realtor questioned the rate her client was receiving on the VA loan. “But rates are down in the 4% range” said the Realtor. This was a full percentage point lower than what we were offering our mutual client. Apparently this Realtor saw an ad on TV or read it in a newspaper and, like many consumers, believed every word she had heard or read. Note to Realtors: one size doesn’t fit all and we need to talk.

There was a time, not that long ago, when a FICO score in the low 600’s earned a borrower the best mortgage rate. Those days are long gone. Replacing that rate setting method is a more complex, more detailed system. The scores to qualify for best rates are much higher and much more stringent. Mortgage rates may be different for a score of 680, 700, 720 and so on. Even then FICO scores are but one piece of this complex puzzle.

There are over two dozen factors that go into determining each mortgage rate. They can  include debt to income, amount of financial reserves of the borrower and the amount of down payment just to mention an obvious few of the factors. No matter what you’ve heard, no matter what you read in the paper (or on a blog) or no matter what the TV ad says there is no one mortgage rate.

Guiding our rate setting is also the Veteran’s Administration’s own underwriting standards. These standards restrict fees and profit (yield spread) on a VA loan. We cannot just raise the rate or add fees as we see fit to make the most money. Frankly, the profit margin on VA loans is not as high as conventional lending because of these restrictions. This is why many mortgage brokers are out of the VA loan business.

VA lending is a different animal than what you see on the TV ads. At VALoansMN we not only assume a fiduciary responsibility to our clients, just as you Realtors do, we have a federal agency looking over our shoulder to make sure that is the case.

We’ve also seen the ads for houses selling for half off the asking price or for pennies on the dollar. We would never call a Realtor and question the price you’ve  negotiated for a client or the homes they’ve shown. We prefer a relationship of mutual trust.