Adrift in choppy waters, mortgage rates edge slightly higher this week

Mortgage rates continued to ride the seesaw this week, down one week and up the next. This time, it was their turn to go up.

The benchmark 30-year fixed-rate mortgage rose 7 basis points, to 6.03 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.31 discount and origination points. One year ago, the mortgage index was 6.29 percent; four weeks ago, it was 5.98 percent.

The benchmark 15-year fixed-rate mortgage rose 9 basis points, to 5.65 percent. The benchmark 5/1 adjustable-rate mortgage went the other way, falling 10 basis points, to 5.85 percent. The benchmark jumbo 30-year fixed, for bigger mortgages, fell 6 basis points, to 7.32 percent.

Rates went up along with the news that inflation is still very much with us, notwithstanding the strong probability that the economy is in recession. On Tuesday, the Labor Department announced that overall wholesale prices rose 1.1 percent in March -- a rate that's about six times faster than the Federal Reserve's comfort level. The core wholesale inflation rate -- not factoring in food and fuel prices -- rose 0.2 percent.

Those were wholesale prices, and wholesale inflation isn't always passed on immediately to the consumer at the retail cash register. On Wednesday, the Labor Department said that overall retail prices rose 0.3 percent in March, and core retail prices rose 0.2 percent.

The two reports presented a mixed inflation picture, leading to moderately higher mortgage rates.

Fees for riskier loans

There's something else that has a more direct effect on the mortgage rate that you pay: risk-based pricing. Mortgage financing giants Fannie Mae and Freddie Mac have been adding fees that make anything but the most plain-vanilla home loan more expensive.

You can get the best combination of rate and fees if you're borrowing less than $417,000 to buy a house as a primary residence, and you make enough money to easily afford the payments on a 30-year, fixed-rate loan, and you made a down payment of at least 20 percent, and the house is in a neighborhood where prices are not falling, and you have good-to-excellent credit, with a score of 740 or above.

If that is you, that means you are subject to risk-based pricing in the form of fees that Freddie Mac and Fannie Mae charge to lenders. The lenders then pass these costs along to consumers, either as fees or higher rates or a combination.

Loan officers and brokers can't quote a rate accurately unless they know details: your credit score; whether you're buying or refinancing; the loan-to-value ratio, or LTV; the ratio of your income to your total debt payments; whether you'll live in it or rent it out ...

Rate shoppers need more info

"I really think this is a topic that people should be aware of when shopping for a loan," says Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla. "You cannot be a rate shopper and simply ask, 'What is your rate?' without setting yourself up for failure and not know and disclose what your credit scores are. Without more information, prospective borrowers could be setting themselves up to appear they are being bait-and-switched from being quoted rates for 'prime' borrowers versus those with scores below 740 and LTVs above 60 percent."

Let's say you have a credit score of 715 and you're buying a house with 10 percent down (or even "only" 39 percent down). Fannie and Freddie sock your lender (and, therefore, you) with a fee of one-half of 1 percent. On a $200,000 loan, that's a $1,000 charge. If you don't want to pay it at closing, your lender likely will waive the fee and raise the rate by one-eighth of a percent.

'Postsettlement delivery fees'

These charges, called "loan level pricing adjustments" by Fannie and "postsettlement delivery fees" by Freddie, can add up. Getting a 40-year loan? Add a fee of 1 percent of the loan amount (or about a quarter of a percent to the rate). Doing a cash-out refinance to get a loan of 90 percent of the home's value? Add a fee of three-eighths of a percent of the loan amount if your credit score is 740 or above, and a bigger fee if the score is lower than that.