02 Jun Shopping for a Lender
I realize that the mortgage industry has created an environment where people feel they need to “shop” for the “best rate.” First of all, I want you to know that I guarantee that my team and I structure loans that will provide the lowest cost over the anticipated life of the loan. This means the rate I suggest may be lower or higher than the “quoted” rates around town. However, if it is higher, I guarantee that my recommended fees are lower to compensate for the higher rate. Realize that there is an inverse relationship between rates and fees, and I typically suggest a loan structure that is not typical for the industry (the way that “quoted rates” are computed.) Therefore, if you hear of a lower rate, do not conclude it is a better deal. You can rest assured that you are being advised by an accredited mortgage professional who understands your goals and objectives. In short, you are in very capable hands.
In the event that you do decide to “shop around,” I STRONGLY recommend that you consider several things. First: make sure you are working with an experienced, professional Mortgage Planner, not just a typical 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. Second: make sure that your lender works for an established company, and that he or she has a “Team” of people working on your behalf who are specialists in what they do. There is nothing more frustrating than working with one person who has a busy schedule, is hard to get a hold of, who gives poor service, and allows unhappy clients.
Here are five simple questions your lender absolutely must be able to answer correctly.
- 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.
- 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, call my office and request our latest “City Creek Mortgage Market Guide.”
- When Ben Bernanke and the Federal Reserve “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.
- 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.
- What is your long-term plan to intentionally, and systematically ensure that I am ALWAYS in the best mortgage loan for my current and future situation?
I have found that most lenders say they have a system for this, but when confronted and asked to show proof, they can’t. The truth is that most lenders do not manage mortgages and care for their clients in a way that saves their clients thousands of dollars over the life of the loan, nor do they truly understand how the largest debt you will ever have works into your long-term financial success.
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 go through this process only four or five times in your entire life… but we do this