Rates are important to every borrower and since home loans can last for 30 years it is important to get the best rate possible for your situation.  But, and in today’s lending environment it is a big BUT, rate is not the only important factor – not like selecting the best price on a toaster.

Other factors that can be more important than rate are how long you plan to be in the home, how quickly the lender with the lowest rate can have your loan approved, closing costs required to get the better rate and other qualifications of the borrower and property.

The shorter the time you plan to have the mortgage, the less important rate is to the decision process.  Unless variations in monthly payment are deal breakers, the financial impact of a shorter loan time is minimized because the differences in interest paid will be factored over just a few years, not the full life of the loan.

Different lenders have different lead times for their underwriting and other loan production activities.  It is not always a direct trade-off but often the lender with the best rate will have the longest lead time to get to the point where your loan is funded.  This is a real trade-off that must be evaluated in today’s lending environment.  Yes, 30 day closings are still do-able when needed just don’t expect that to also include the best rates available on the day you lock.

Rate buy-downs are another way to manage the rate to a lower number.  I can honestly say I have had only one borrower choose to do a significant buy-down and it was done totally to manage a lower payment.  Buy-downs compete for cash resources that often are needed elsewhere when one is getting a new home loan.

Sometimes the property or borrower have reasons or circumstances that prevent choosing the best rate.  Consider the impact of making sure one closes before the First Time Home Buyer tax credit opportunity goes away.  Paying a slightly higher rate could easily be offset by the $8000 credit versus risking loss of the credit because the loan did not fund before 12/1/2009.