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Shopping
Around?
Here's
the Inside Scoop!
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, click the green MMG Weekly banner above.
3 When Mr Bernanke
and the Federal Reserve (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 are changing a
rate called the "Fed Funds Rate". This is
a very short-term rate that impacts credit cards, credit lines,
auto loans and the like. Mortgage rates most often will
actually move in the opposite direction as the Fed change,
due to the dynamics within the financial markets. For
more information and explanation, just give us a call)
4 What is happening
in the market today and what do you see in the near future?
(If a lender cannot explain how
Mortgage Bonds and interest rates are moving at the present
time, as well as what is coming up in the near future, you
are talking with someone who is still reading last week's
newspaper, and probably not a professional with whom
to entrust your home mortgage financing.)
Be smart. Ask questions. Get answers!
More than likely, this is one of the
largest and most important financial transactions you will
ever make. You might do this only four or five times
in your entire life, but we do this every single day.
It is your home and your future. It is our profession
and our passion. We're ready to work for your best interest.
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 TO 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, 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. Would you ever
want to travel in a car or airplane that had been built using
the very cheapest materials, built by the very cheapest laborer?
Probably not. Best case, expect very little advice, experience
and personal service. Worst case, expect that you may not
close at all. All too often, you do not know until it is too
late that cheapest is not BEST. That being said, we are not
the cheapest. Of course our rates and costs are very competitive,
but we have also invested in the systems and team we need
to ensure the top quality experience that you deserve. If
you want the cheapest, head on out to the Internet, and we
wish you good luck. But remember that the cheapest rate on
the wrong strategy can cost you thousands more in the long
run.
Third, 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.
Fourth, 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.
On the other hand, 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.
Fifth, 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.
Again, our advice to you is to be smart.
Ask questions. Get answers.
As you can imagine, we wouldn't be
encouraging you to shop around if we weren't pretty confident
that we feel that we can give you a great value and serve
you the very best.
Please call us with any further questions
you may have at this time, we are ready to work for your best
interest!
Jeff
Pickering
Office: (623) 551-9360
www.PickeringGroup.com
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Licensed Mortgage Banker and/or Authorized Lender in all 50 states and
the District of Columbia