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Shopping Around? Don’t Be Fooled!
Well, you may be thinking - hey, I'm a smart enough person - how on earth could I be fooled? And who would want to fool me?
Excellent questions - here are some answers.
Buying a home or refinancing is one of the largest financial decisions you will make in your life - and unfortunately, this
means you may experience some stress as you approach these decisions. As in many other industries, the mortgage industry has
more than its share of unethical individuals that are out to make a buck, but do not have your best interest at heart, and
may try to take advantage of your stress at this point in your life. For example, we have heard numerous stories about people
being called and told that they need to "quickly come into the office and get all the paperwork signed, rates are changing".
Not true - you should never be made to feel panicked or pressured about making this size of a financial decision. If you are
truly ready, a rate can be locked right over the phone.
Advertisements in the newspaper or online are also rampant with misinformation, designed only to get phones ringing. Rates
change daily, sometimes hourly, so just by virtue of being in print somewhere, they are almost sure to be outdated. The trick
is, lenders can put anything out there, and if it gets the phone to ring, that is all they need. The following conversation
ensues….."Hello, I'm calling about the 7% rate I saw that you advertised in Saturday's newspaper?" "Well, it's wonderful that
you called! Rates did change a bit this morning, and are now at 7.5%, but let's talk a little more about you……"
Lenders will also frequently promote "free appraisals" or "discounted origination fees". This is great, but BE AWARE that if
you are not paying for it one place, you are paying for it somewhere else. Interest rates and closing costs go hand in hand,
so it is important to look at the overall loan package, not just one individual item that seems discounted. We all work off
the same financial markets with essentially the same profit margins. Do we make money when we do your loan? Certainly, just
like you get paid for working at your job. What we seek for you is the best balance between a great interest rate and
reasonable closing costs.
Online lending is also particularly scary - ANYONE can throw up a mortgage website, and be aware that the person behind that
great rate you are seeing online might be some guy working out of his basement in Florida who has been in the business for 6
months. For example, closing costs vary significantly state to state - out of state lenders frequently misquote fees, as they
are not aware of local and state requirements. Are you really willing to take this risk?
THE TRUTH:
Is buying a home stress free?
Absolutely not! Purchasing a home is a major financial commitment, and moving is a major life event. What we desire is that
your stress will not be in any way related to your home financing - save it for which new sofa you should choose or what
color to paint that hideous bathroom.
Are we the cheapest place in town?
No, but we are always very competitively priced. We believe that to a certain degree, you get what you pay for. Consider
this: Have you ever been on a taxi ride? How about a limo ride? Did they both get you where you wanted to go? Probably, but
my guess is that you enjoyed the limo experience, and tolerated the taxi ride. Which driver would you recommend to your
family, friends, and coworkers? Probably not the taxi driver, even though he was a few bucks cheaper. Our desire is that your
experience with us is one you will enjoy, and would be excited to refer us to others. Our service to you is not only to
provide you with competitive rates and costs, but to handle your transaction with the personal care and professional
treatment you deserve.
If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands
of the lowest bidder. Best case, expect very little advice, experience and personal service. Worst case, expect that you may
not close at all. Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the
long run. This is the largest financial transaction most people will make in their lifetime.
What about the horror stories we have all heard about?
At the last minute, the loan is suddenly not approved, or the rates and costs change dramatically? Or worse yet, the loan
falls through entirely, and the transaction falls apart? Unfortunately, it happens - we hear the stories too. This is exactly
why it is so important to trust your business to a professional, not a bargain basement operation. A horror story like that
has never happened to one of our clients, and you will not have surprises at the closing table.
How do you know we will do a great job for you?
Almost 100% of our business has been referred to us by satisfied clients, trusted financial advisors and experienced
Realtors. Chances are, you did not stumble across our website by accident, as we do not promote ourselves blindly to the
general public. While most loan officers spend their time mass marketing and looking for new business from just anywhere, we
devote our time and energy to our clients only, educating them, discussing the best loan options for each individual
situation, and taking care of details to ensure that the loan process runs as smoothly as possible.
SHOPPING AROUND? HERE’S THE INSIDE SCOOP ON HOW TO DO IT RIGHT!
First: make sure you are working with an experienced, professional loan officer. The largest financial transaction of your
life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting
the issues that may arise along the way. But how can you tell?
Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE
ANSWERS…RUN…DON’T WALK… RUN…TO A LENDER THAT DOES!
1) What are mortgage interest rates based on? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT
the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is
not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong
indicators.)
2) What is the next Economic Report or event that could cause interest rate movement?(A professional lender will have this
at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate,
visit www.mortgageplannersonline.com and hit the green MMG Weekly banner – this is a copy of our weekly newsletter, let us
know if you want to be added to my weekly distribution list
3) When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates?
(The answer may surprise you. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount
Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On
the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is
due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us
a call).
4) Do you have access to live, real time, mortgage bond quotes? (If a lender cannot explain how Mortgage Bonds and interest
rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is
still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would
you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no
idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No
way!)
SHOPPING... PART 2
Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets
you must know to “shop” effectively.
First, IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS. But you didn’t really need us to tell you that, did you? Mortgage
money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more
questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the
length of the lock-in? If fees are discounted, is it built into a higher interest rate?
Second, MAKE CORRECT COMPARISONS. When looking at estimates, don’t simply look at the bottom line. You absolutely must
compare lender fees to lender fees, as these are the only ones that the lender controls. And make sure lender fees are not
“hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan,
but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear
lower, since they know that many consumers are not educated to NOT simply look at the bottom line! APR? Easily manipulated as
well, and worthless as a tool of comparison.
Third, REMEMBER THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. This means that if you are comparing lender rates and fees
– this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and
want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it
will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks
typically have slightly higher rates.
Please call us with any further questions you may have at this time – we are ready to work for your best interest!
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