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ENSURE MORTGAGE SHOPPING PAYS OFF
Shopping Around for a Mortgage?
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 in most people's lives is far too important to place in the
hands of someone who is not capable of advising you properly and troubleshooting
the issuesthat 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!
 QUESTION #1: WHAT ARE MORTGAGE INTEREST RATES BASED ON?
The only correct answer is Mortgage Backed Securities (MBS) 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's not unusual to see them move in completely opposite directions. DO NOT work with a loan officer who has their eyes on the wrong indicators.
QUESTION #2: WHAT IS THE NEXT ECONOMIC REPORT OR EVENT THAT COULD CAUSE INTEREST RATE MOVEMENT?
A professional lender will have this at their fingertips. If they don't, how can they possibly fulfill their responsibilities to you? A lender should be able to watch out for your interests and let you know when market conditions might impact your access to better rates and terms.
 QUESTION #3: WHEN BERNANKE AND THE FED "CHANGE RATES", WHAT DOES THIS MEAN...AND WHAT IMPACT DOES THIS HAVE ON MORTGAGE RATES?
The answer may surprise you. When the Fed makes a move, they change the "Fed Funds Rate" or "Discount Rate". These are both very short-term rates that impact credit cards, Home Equity 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 an explanation, just give one of us a call.
QUESTION #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 stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but has no idea what the stock's movement looks like today, let alone what market conditions could cause changes in the near future? NO WAY!
Be smart... Ask questions... Get answers!
AN INFORMED BORROWER IS A SMART BORROWER!
More than likely, this is one of the largest and most important financial transactions you'll ever make. You might do this only four or five times in your entire life... but we do this every day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest.
Once you are satisfied that you are work with a top-quality professional mortgage planner, 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 me 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 rate 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. Best case, expect very little advice, experience or 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 cheapest isn't BEST.
But, if you want the cheapest quote, head on out to the internet and I'll wish you good luck. Just remember that if you've heard any horror stories from friends, family or co-workers about missed closing dates or (big surprise) last-minute changes on rate or costs... these are often due to working with discount or internet lenders who may have a lack of experience.
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. That being said - we are not the cheapest. Our rates and costs are consistently competitive, but we also have the invested in the systems and team needed to ensure the top quality experience that you deserve.
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 (in section 800 on the Good Faith Estimate) as these are the only ones under the lender's control and influence. And make sure the lender's fees aren't "hidden" down amongst the title or state fees.
A lender is responsible for quoting other parties' fees involved with a mortgage loan, but since they are third party fees - from the settlement agent, state fees or homeowners' insurnace agent fees - they are often under-quoted up front by a lender looking to make their bottom line appear lower since they know many consumers are not educated to NOT simply look at the bottom line.
APR? Easily manipulated as well, and worthless as a real tool of comparison.
FOURTH, UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. That means you can have any interest rate 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 upon what your financial goals are. A professional lender will be able to offer the best advice and options to help you find the balance between interest rates 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, you're searching for 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 the quotes at the same time on the same day or it simply won't be an accurate comparision. You'll also want to specify the length of the lock you are looking for, since longer rate locks (EG: 15 days vs. 30 days) 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 we can offer you great value and service.
Please call with any questions you may have - we are ready to work for your best interest.
ADDITIONAL RESOURCES:
www.hud.gov/buying/index.cfm
www.federalreserve.gov/pubs/mortgage/mortb_1.htm
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