Rate Shopping

Here’s the Inside Scoop on How to Rate Shop for a CA Mortgage the RIGHT WAY!!

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 KNOW 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 of Mortgage Bonds, NOT the 10-year Treasury Not.  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 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, let me know if you want to be added to my weekly distribution list.)

3) When Bernanke and 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 me information and explanation, just give me 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 you 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!)

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’s your home and your future.  It’s my profession and my passion.  I’m 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 TOO GOOD TO BE TRUE, IT PROBABLY IS! But you didn’t really need me to tell you that, did you?  Mortgage money and interest rates all come from the same places, and if something sounds unbelievable, better ask a few more questions and find the hook or catch.  Is there a prepayment penalty?  Teaser start rate?   If the rate seems incredible, are there extra fees, discount points, origination points etc?  What is the length of the lock-in?  If closing costs fees are discounted, is it built into a higher interest rate?

Second: YOU GET WHAT YOU PAY FOR! If you have 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.  All too often, you don’t know until it’s too late that the cheapest isn’t BEST.  But if you want the cheapest quote – head on out to the internet, and wish we wish you good luck.  Just remember that if you’ve heard any horror stories from family members, friends or co-workers about missed closing dates, or big surprise changes at the last minute on interest rate or costs and fees…these are often due to working with discount or internet lenders who may have a serious lack of experience and honesty.  Most importantly, remember that the cheapest rate on the wrong strategy can costs thousands more in the long run.  This is the largest financial transaction most people will make in their lifetime.  That being said – I may not always the cheapest.  Of course my  rates and costs are very competitive; however I also have invested in the systems and team I need to ensure the top quality experience that you deserve.

Third: MAKE CORRECT FEE COMPARISIONS! 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, escrow 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 INTREST RATES CAN CHANGE DAILY, EVEN HOURLY! This means that if you are comparing just lender rates and fees – this is a moving target, sometimes 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, or within a reasonable time frame, 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, my advice to you is to be smart.  Ask questions.  Get answers.

As you can imagine, I wouldn’t be encouraging you to shop around if I weren’t pretty confident that I feel that I can give you a great value and serve you the very best.

Please call me with any further questions you may have at this time – I am ready to work for you!