Generic prices are prices based on assumptions of the borrower having the most favorable characteristics that command the lowest prices.
When a borrower asks off-hand what are the charges of the lender, without any information and details provided by the borrower, the lender can only provide generic price quotes.
Therefore in order to attract the customer with the lowest price possible, assumptions about the borrower can be made:
- The property is owner-occupied
- The borrower has an above average credit score
- The loan will be a conforming mortgage
- A very low debt ratio
- etc
All these factors play a part in qualifying the borrower for the best terms and interest rate on a home loan.
Which is why it will be the lowest price the borrower can expect to be charged.
However, any assumptions that turn out not to be true will result in the price going up.
This is why it is almost unheard of that a borrower pays a closing cost as low as what was quoted in the generic price.
To get a better grasp of what generic price is, imagine walking into a premium shopping mall and see one of the branded boutiques putting up posters advertising 80% off.
Upon walking in, you realize that only a small dump bin contain some apparel at 80% off. The rest of the store are made of regular priced items.
In this instance, the 80% off is the generic price quote.