Critical Qs

I’m going to give you three simple questions every person getting a mortgage should be asking their loan officer. These questions can actually save you from paying thousands of dollars too much for your mortgage and will maximize your borrowing potential. I’m also going to tell you how to avoid leaving anything on the table when it comes to getting the best rate and fees during the mortgage process.
This insider mortgage secret will allow you to Know you got a great deal on your next mortgage instead of just thinking you did. I’ve shown this to some of the best agents in the industry and even they were surprised to see how what I am about to tell you works. The examples I’m going to give you are absolutely going to blow you away.
Let’s start with the fact that interest rates have a cost or credit associated with them. Lower rates cost more to get while taking a higher rate could allow for a credit toward closing costs. I’ll call this credit rebate for our purposes here. OK, so people applying for a mortgage are quoted an initial interest rate based on their personal factors like credit score and the loan program. What people typically don’t know it that this interest rate will fall into one of three categories depending on how the lender is trying to sell them on the mortgage. A PAR rate that has enough rebate so that no origination fee is charged, a lower rate with a cost that effectively buys down the rate, or a slightly higher rate that has extra rebate that can be used to reduce other closing costs.
The Par rate or No Fee option makes people feel like the mortgage is a somehow cheaper. A lower rate makes people assume the deal may be better long term, and a rate that gives money back for closing can feel like found money. Selecting the right option can be difficult and mortgage marketers will typically pick only one option, and play heavily on the emotion associated with it. The choice should always be made based on facts and not emotions. Taking a lower rate to save $10 per month may seem like a great plan until you realize it just cost you $2000 in fees to do it. Likewise, accepting a higher rate that increases the payment by $10 per month for only a $200 rebate may not be the wisest plan either. You see you should receive a thorough analysis of the comparison with easy to understand results.
Savvy consumers should always ask three critical questions to make sure they have a good 3 rates strategy and to alleviate the chance of accepting a suboptimal mortgage. The questions go something like this: “Can I increase my rate slightly to lower my closing costs, What cost and payment are associated with a lower rate, And Why should I choose any one of these 3 rates over the other. It’s pretty likely you’ll find out how good your loan officer is at this point.
Now that you know to always ask what your 3 rate options are, how do you make sure your loan officer is giving you all of the rebate that is available or just pocketing your money. Is all of the money you are using to buy down the rate actually getting you the best one available?
Let’s take an example and say we have a PAR interest rate with no lender fees. This means that there’s enough rebate at this rate to pay the mortgage company without any upfront fee from the borrower. For this scenario let’s use easy numbers and say that by increasing the rate a quarter of a percent, that there’s $2000 in extra rebate available. Or On the flip side, for a cost of $2000 there is an interest rate available that is a quarter of a percent lower. Notice that I said available – not given to you as an option.
Banks and retail Lenders, don’t have fixed compensation safeguards, or requirements to disclose their companies total compensation. The starting point for a bank in this example is really arbitrary because no defined compensation ever gets established. Because of this the costs become fluid and It would be typical for the interest rate to be increased the quarter percent and for only $1000 go towards reducing closing costs. I bet you can guess where the other $1000 goes. Likewise buying down an interest rate may result in only $1000 being used toward getting the lowest rate and the other $1000 – you guessed it – going to the Bank or retail mortgage company. This can leave a borrower thinking they got a good deal, but actually just made the lender more money. This is more common than not and the industry term for it is “banking the funds”.
Wholesale Mortgage brokers establish a fixed compensation that is typically cheaper and it’s set before a borrower ever walks through the door. Source Mortgage loan professionals actually tell you what it is upfront and it can be verified through the closing documents. Knowing what your mortgage provider is truly making, in total, allows everyone to be on the same page with nothing hidden. So all $2000 of the extra rebate in our example benefits the borrower and 100% of the buy down fee is used to get the quarter of a percent reduction in interest rate.
Rates can change several times a day which means your 3 rates strategy may as well. At Source Mortgage the fairness of your deal won’t by having a true team without the worry about getting a square deal? We are Locally Owned and operated, we are here to help.