What's in Your Rate?

In our previous post, we shared some of the frequently asked questions to a lender. One of those questions was “what’s your rate?” And the answer was “it depends.” That’s not the answer most people want to hear, but it’s true. There are approximately 26 different factors that goes into quoting rates. We'll share 13 today and the other 13 in tomorrow's blog.

1. Loan Size – how much money are you asking for? Often if you are requesting an amount under a certain level (i.e. $100,000), there may be a slight increase in rate.

2. Loan-to-Value (LTV) – what percentage is your loan amount to the value of the property? Typically, the lower the percent, the lower the rate.

3. Combined Loan-to-Value (CLTV) – this ratio includes not only the current loan you are wanting, but any additional loans on the property, such as a home equity.

4. Credit Score – the higher the credit score, the lower the rate.

5. Credit History – the less credit history you have, the less knowledge a lender has of your repayment ability, possibly making you slightly more risky. The better the payment history, the better the rate.

6. Escrow Preference – some lenders require escrows, or money put aside to pay for things such as taxes, insurance, etc. If you choose not to escrow, you may be penalized by having a higher rate.

7. Closing Date – it is important to lock in on a rate that is as close to your closing date as possible. The longer the rate lock period, the higher the rate will be.

8. Loan Type – fixed, variable, balloon – these all have varying rates because of the variation of risks.

9. Property Type – a residential house will have a lower interest rate than a commercial farm on 50 acres.

10. Occupancy Type – typically rental or investment properties have higher interest rates.

11. Residency – rates will be lower if you plan to live in the house full-time versus using it as a second home.

12. Available Assets – what additional assets do you have as possible collateral? The more down payment you have, usually the lower the rate.

13. Asset Seasoning – how long have you had your assets? There may be restrictions for assets owned under a certain timeframe that could affect the rate.

You don't have to remember all of these, but if your lender is quoting you a rate without asking some of these questions, be sure to ask them what criteria they are using to factor your rate.

Check back tomorrow for the other 13 factors that affect your rate.

Frequently Asked Questions to a Lender

What's your rate? How much are closing costs? You got questions. We got answers! At Farm Credit, our loan officers meet with hundreds of customers a year who ask those exact questions. So, what's the answer to those questions you ask?

Q: What are your interest rates? A: It depends. This isn’t the answer most people want to hear, but it’s the most honest one. Before a loan officer can quote rates, they need to gather as much information as possible – amount of loan, loan type, desired terms, etc. There is a wide range of rate products that are available depending on your needs. It’s also important to remember that rates change daily (even several times a day for mortgages).

Q: How much are closing costs? A: It depends. Most closing cost fees are tied to the loan amount, and a purchase has more costs than a refinance. Some of the things that are included in the closing costs are: transfer tax, recording costs (we are exempt in MD), title work, initial escrow (to pay taxes and insurance), appraisal, daily interest (interest from settlement to the first payment) and origination fee.

Q: How much down payment is needed? A: It depends. There are many different products available that have a wide variety of down payment requirements. For farm loans, the general down payment is 20%. For residential mortgages, it can vary from 0% (depending on program qualifications) up to 20% (in order to avoid mortgage insurance). In general, the more down payment you have, the more likely for both approval and a great rate.

As you can see, the answer to many of these questions is often “it depends.” We look at every loan request as unique and individual. If you have other questions you'd like answered, leave a comment or email info@mafc.com. In the meantime, look for our next blog listing the 26 factors that go into quoting a rate.

MidAtlantic Farm Credit's CEO Receives Award

Bob Frazee, CEO of MidAtlantic Farm Credit received the University of Maryland Distinguished Alumnus Award. These awards are presented annually to the University of Maryland alumni who have achieved recognition for excellence in their profession or field.

Bob was recognized at the Twelfth Annual Alumni Association Awards Gala held on Saturday, April 14, 2012. Visit Bob’s blog to read his acceptance speech. For more information about the awards, visit http://alumni.umd.edu.

Farm Credit Names New Partners To Its National Contributions Program

Farm Credit, a national provider of financing and related services to agriculture and rural America, awarded $420,000 in the first quarter of 2012 to young, beginning, small and minority farmer organizations, agricultural education programs, and other agricultural industry advocates. Farm Credit's National Contributions Program provides $2 million a year in funding to support the lives and livelihoods of farmers and ranchers. The national funding complements local and regional giving provided by Farm Credit entities across the United States and in Puerto Rico.

"Farm Credit supports both large well-established organizations and those who are working towards achieving their goals at the grassroots level," said Christina Bowen, director of national contributions for Farm Credit. "This approach allows us to support the time-tested programs developed by National 4-H Council and the National FFA Foundation as well as innovative new programs being brought to the industry by relative newcomers.

Recipient Natasha Bowens, director and founder of The Color of Food, plans to use Farm Credit's contribution "to elevate the representation of minority farmers across the country, and bring awareness to the racial inequities in the food system while providing opportunities for farmers to access information, resources and support."

The Farm Credit National Contributions Program's application deadline for the second quarter of 2012 is May 31. Qualified applicants are invited to apply today at www.farmcredit.com. Click on the "Apply for Grants and Sponsorships" button.

Farm Credit National Contributions program first-quarter 2012 recipients:

• American Farmland Trust

• AgriNomics Vision 2013 - American Society of Farm Managers & Rural Appraisers

• National Value Added Conference - C.S. Mott Group for Sustainable Food Systems at MSU

• The Color of Food

• Commodity Challenge - Center for Farm Financial Management

Source: Agri Marketing - Online - 4/18/12

Maryland farmers are rock stars!

The Maryland community will be gathered around their sets tonight to watch the premiere of The Maryland Harvest. This documentary is about Maryland farms and farmers and the chefs who love them. It is hosted by local radio personality Al Spoler and produced by Houpla Inc.

In a statement from Maryland Agriculture Secretary Buddy Hance, he says, "The documentary highlights the growing importance that top chefs are placing food that comes fresh from the farm and the partnerships that are being formed to ensure consumers are getting the best tasting and most nutritious food possible."

At Farm Credit, we are pleased to have helped underwrite the cost of this program and are excited about it's premiere.

If you'd like to find out why Maryland farmers are rock stars and are the rolling stones of food check out The Maryland Harvest documentary tonight on MPT tonight (April 17) at 9 p.m.

Soy, corn and peanut crop acreage projected to increase this season in Virginia

This year's crops for soybeans, corn and peanuts are projected to consume more acreage as compared to last year, according to a press release distributed by the  Virginia Department of Agriculture and Consumer Services.

Producers of soybeans are planning to drive up the amount of soybean plantings to 590,000 acres, which would be 30,000 acres more than last year's harvest. The data was gleaned from a survey conducted by the Virginia Field Office of the National Agricultural Statistics Service, which is a division of the U.S. Department of Agriculture. The survey was administered on March 1.

Corn plantings are projected to encompass 500,000 acres, a climb of 10,000 from last year's crops. Growers of peanuts will plant 23,000 acres, which is 7,000 more acres as compared to last year.

But, despite the climbs of that produce, cotton crops will see a reduction in Virginia, an 18 percent decline as compared to last year's figures.

Nationwide, corn planting has gained 4 percent as compared to last year while soybean figures dropped 1 percent. Wheat plantings gained 3 percent and cotton plantings dropped 11 percent.

West Virginia farmers seek transfer of deer farming to agriculture department

West Virginia farmers are optimistic about the prospects of a bill that will permit deer farming to join the industry, which is possible by transferring the industry from the Department of Natural Resources to the Department of Agriculture, according to WBOY.

Ham, turkey, chicken and beef are part of the farming industry thus venison from deer ought to be as well, according to president Steve Toth with the West Virginia Deer Farmers Association. He argues that Pennsylvania last year capitalized on deer meat to the tune of $15 million in revenue so West Virginia ought to be able to do so as well.

"We're controlled by the DNR right now and most other states are controlled by the Department of Agriculture and we consider our deer as livestock," Toth told the news source. "There is a difference between a domestic turkey and a wild turkey so why can't there be the same thing for a deer?"

The West Virginia Extension Service indicated deer farming last year contributed 66 jobs and $1.44 million in sales.

The ability to host a deer farm will serve additional purposes like allowing visitors such as children to pet and feed the deer.