SHOPPING FOR A HOME LOAN?
HERE’S THE INSIDE SCOOP THAT OTHER LENDERS DON’T WANT YOU TO KNOW!First: make sure you are working with an experienced, professional loan officer. This applies to all home loan products including purchases, refinancing, custom construction loans and home equity lines of credit. More than likely, this is one of the largest financial transactions you will ever make. It is far too important, and costly, 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 if your lender is experienced and professional?
INTERVIEW YOUR LENDER WITH THESE FOUR SIMPLE QUESTIONS!
Your Lender MUST Immediately Be Able To Answer These Questions Correctly. If They can't …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.homefinance.com and hit the green MMG Weekly banner located at the bottom of the home page – this is a copy of our weekly newsletter, let us know if you want to be added to our weekly distribution list by emailing us at shelley@homefinance.com.
3) WHEN BEN BERNANKE, (THE FEDERAL CHAIRMAN) “CHANGES 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 BONDS AND INTEREST RATES THROUGHOUT THE DAY?
A lender MUST be continually monitoring how mortgage bonds and interest rates are moving in real time, not just once a day. This is the only way they can inform you in advance of costly intra-day price changes or decrease in rate opportunities. If they don’t you are putting your faith in someone who is reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who uses yesterday’s paper to tell you a stocks performance instead of taking real time market conditions into consideration? No way!
Be smart... Ask questions… Get answers!
As you can imagine, we would not be encouraging you to shop around if we were not fully confident that we can provide you with not only great value but serve you in the most professional manner possible.
IDENTIFIED PROFESSIONAL LENDERS - NOW WHAT!
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.
1) IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS! You didn’t really need us to tell you that did you? Mortgage money and interest rates all come from the same places! 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?
2) YOU GET WHAT YOU PAY FOR!
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 scenario, expect very little advice, experience and personal service. Worst case scenario, you may not close your loan at all or get hit with major surprises at closing like interest rate changes and additional or hidden closing costs. All too often, you don’t know until it’s too late that cheapest isn’t BEST. If you want the cheapest quote – logon to the Internet, and we wish you good luck. Just remember, if you’ve heard any horror stories from family members, friends or co-workers about missed closing dates, last minute on interest rate or closing cost changes…they placed their faith in discount or internet lenders who may have a serious lack of experience or integrity. REMEMBER - that the cheapest rate on the wrong strategy can cost you thousands of dollars either now or in the long run.
3) MAKE CORRECT COMPARISONS.
When looking at estimates, don’t simply look at the bottom line. You MUST compare lender fees to lender fees, as these are the only FEES 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 simply look at the bottom line! APR - Easily manipulated and a worthless tool of comparison.
4) UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND.
This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. In other words, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.
5) UNDERSTAND 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. CALL US ANYTIME – OUR TEAM IS STANDING BY TO ASSIST YOU! Provide By The Homefinance.com Team
1915 – 15th Avenue NE • Issaquah, WA 98029 • PH: 425.392.0110 • www.homefinance.com
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