Are you mortgage “Rate Shopping” in Roanoke?
STOP SHOPPING AND READ THIS FIRST!
Generally, the first question I am asked as a loan officer and mortgage company owner when I talk to a client in Roanoke is, “What is your rate today”? My answer is always “whatever you want it to be”! They pause and look at me kind of funny and then say are you kidding, and I say no! Make it anything you want since I know absolutely nothing about you and your situation and thus your guess would be as good as mine!
Look at it this way, when you go to a reputable doctor or a reputable car repair establishment, do you ask them what it will cost as soon as you walk in the door? Of course not! You explain your particular situation in detail, the doctor or car repairman ask some questions, you provide answers and maybe even some documentation, and then they review your situation for a few minutes, hours or a day or two. At that point, they call you with their findings. Only then do you find out what your particular situation calls for and what costs will be associated with your situation.
It is no different in the mortgage business, and anyone that tells you any different is a fool. The lowest mortgage rate for you may end up not being the best loan for you in the long run. The lowest motrgaege rate in Roanoke is low for many reasons - generally it is for a shorter period of time or for a particular type of loan. Remember, what you really want is the best loan for your particular situation along with a great mortgage rate. The wrong type of loan with a great rate can cost you thousands over the long term especially if that low rate changes when you least expect it.
So, how do the loan officers, bankers, mortgage brokers in Roanoke and others that offer mortgage loans get you to take their offer? It’s simple, they make you a great offer (an offer that they cannot obtain - but you do not know that yet) and then as the closing approaches, something suddenly comes up or when you show up at closing you are surprised. This is called “Bait and Switch”, a common tactic in all types of sales. The loan officer will say that at the last minute rates went up, or your credit scores went down, or that the credit markets were unkind this week, or the underwriter took another look at your loan file, or your property did not appraise out as promised. What should you do? RUN-RUN-RUN! If I promise one of my borrowers a rate and particular type of loan, I deliver that loan and term with only one caveat. That caveat is that you have told me the truth, the whole truth and nothing but the truth! I have taken your information, I have asked you many questions in many different ways, and at the last moment I find out after I have quoted you a rate and term that you are divorced and paying child support (you never told me that), or you took out a loan on your 401-K (you never told me that), or that you are behind in your mortgage payment 3 months (you never told me that), or that you quit your job two days before the closing; then all bets are off - I cannot deliver you the loan that I promised because you did not tell me the truth and give me all of the facts.
Another thing to remember is that I don’t work for free and neither does any other Roanoke lender. We all earn a fee off of your loan. The difference is how we show it and explain it to you, the borrower. Some Lenders have very low closing costs. They advertise closing costs of $250.00 plus appraisal and title insurance. Some may even advertise no closing costs at all. Think, all of us have the same closing costs. All of us need to do an appraisal, pay our processors and underwriters and loan officers, not to mention all of the other fixed costs that go into the loan process (phones, paper, office space, and computers). So how do we do it? Quite frankly most lenders and brokers fail to tell you the whole truth. Unless you ask very specific questions you may never know the whole truth. But does it matter? When you buy a car or refrigerator or a new home, do you know what that car really cost? What you knew was what one of your friends paid for an auto similar to the one you are interested in purchasing or what a salesman said the home cost to build and the builders profit if any, was on top of that cost. Stop, what difference does it really make as long as you are receiving what you want and it is a fair transaction? It is the same in the mortgage business; we are selling you a loan. Not everyone is going to pay the same price. Some mortgage companies have higher prices than others (they may have higher costs). This means there is competition in the marketplace for your loan. That means you can shop around and find the best loan for your particular situation with a great rate. Usually, there is someone always willing to give you a lower rate! BEWARE, is it the right loan for your particular circumstances or just a low rate?
Loan officers and Lenders charge one of three ways:
- Up front fee with the lowest rate possible
- Up front fee and back end fee (yield spread premium) with the middle of the road rate.
- Back end fee (yield spread premium) only, highest rate.
The backend fee or yield spread premium is what a Lender (FNMA, Wall Street, GNMA, and Freddie Mac) will pay a mortgage company for delivering the loan to them. You, the borrower, do not pay this fee at closing but the base interest (Par Rate) rate is raised to compensate the Lender for paying the mortgage company a fee. Thus, you are paying a small increase in the base interest rate over the entire length (years) the loan is outstanding. If the par rate is 7.00% per annum on a $100,000 loan and the mortgage company receives a 1% yield spread premium that might equate to a fee of $1,000 to the mortgage broker, but only a .125% bump to your rate of 7.00%. Your rate would become 7.125% and your additional cost would be approximately $10.42 per month over the life of the loan. Or, you could choose to pay the $1,000 fee up front. Remember, there is no such thing as a free loan; I’m going to receive my fee one way or another.
You can protect yourself by making sure you receive a Good Faith Estimate “GFE” and Truth in Lending Statement “TIL” from your loan officer. These statements are required by law to be sent to you within 3 days of the loan officer taking an application. They give you the ability to ask questions and compare apples to apples. If you do not receive the Good Faith Estimate within the required time; DEMAND IT! If you still do not receive the GFE and TIL, find another mortgage broker! After all, it’s the law!
Save thousands by shopping wisely but remember to obtain the right loan for your particular circumstances along with a great rate. Beware of “Bait and Switch” - a promise today that cannot be met on the closing date! Compare, Compare, Compare! Use their GFE and TIL to compare against others. Finally, ask alot of questions. If you cannot receive answers that make sense or that you are comfortable with, find another mortgage broker or loan officer. Have a great day shopping for a mortgage loan in Roanoke!
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