Last updated on August 3rd, 2020
The mortgage industry can be a little bit old school. Similar to how the stock market used to operate in sixteenths, and later eighths, mortgage rates are mostly offered in eighths.
Before 2001, the stock market only allowed price movements as small as one-sixteenths, an archaic method that gave way to the introduction of decimals.
The issue was that big traders were losing out when trading millions of shares, because as we all know, those little fractions can add up. The rest of the world was also using decimals, so it was time to evolve.
Today, you can buy and sell stocks for prices like $73.805 as opposed to just $73 3/4. That matters if we’re talking about a large purchase or a massive sell order.
Now it’s probably not going to be as impactful with a mortgage, but in this day and age, every little bit seems to matter.
Do You Want a Really Specific Mortgage Rate?
- UWM Exact Rate allows custom rates to the thousandth decimal point
- Mortgage brokers can “create the unshoppable loan”
- Pricing better matches closing costs on the loan and can be used to avoid principal reductions
- Even a fractional improvement may be enough to win a borrower’s business
Typically, you’ll see that your mortgage rate is either a whole number, such as 3%, or an eighth of a number, such as 3.125%.
Some lenders and credit unions also offer promotional rates below key thresholds, such as 2.99%, to make their offer appear lower than the competition.
After all, it looks a lot better to hang a big banner with a price that ends in .99% than it does .125%.
Now one lender is going a step further by allowing its mortgage broker partners to offer mortgage rates in all types of endless crazy combinations.
United Wholesale Mortgage (UWM), the largest wholesale mortgage lender in the country, recently launched “Exact Rate.”
As the name implies, it lets borrowers obtain very specific mortgage rates, instead of being stuck with a whole number or an eighth of a percent.
In fact, you can get a mortgage rate priced to the thousandth decimal point in virtually any combination near that main eighth of a percentage point.
Mortgage Rate Quotes You Can’t Get Elsewhere
- Brokers can price their loans just below those of its competitors
- Simple way to differentiate in a market that is very homogeneous
- May usher in new era of more exact mortgage rates in the industry
- But borrowers will likely still pay for the fractionally lower rates and barely benefit
UWM President and CEO Mat Ishbia says you can “create the unshoppable loan with Exact Rate.”
And that it is “harder for that borrower to go get a quote from someone else.” Because let’s be honest, who else is offering a 30-year fixed at 2.541%?
Ishbia says, “there shouldn’t be a loan that you ever quote on the eighths.”
He notes that the max rate on its new Conquest 30-year fixed loan program is 2.875%, but that brokers shouldn’t quote that rate. Instead, “use 2.873%, 2.871%, 2.799%.”
By doing so, mortgage brokers can differentiate their offerings, effectively creating something out of nothing in the very boring world of vanilla mortgages.
And Exact Rate can be used when locking a conventional home loan or even a government loan, such as an FHA loan or VA loan.
It’s certainly an interesting concept, and could usher in more exact pricing on mortgages going forward.
Of course, you might still pay for that fractional price improvement, so don’t get too excited.
Also note that you probably won’t even notice the difference in both monthly payment or total interest paid when we’re talking about thousandths of a decimal point.
Lastly, when shopping a mortgage from lender to lender, pay attention to the mortgage APR, not the mortgage rate. It matters how much you’re paying to obtain said rate.
About the Author: Colin Robertson
Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.