Mortgage Payment vs Mortgage Interest Rate

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

mortgage interest rates

 

Mortgage Interest Rates - When people shop for mortgages, one of the first things they want is to know the interest rate. Not only that, they want the best and lowest rate. When your average loan officer hears this, they usually don't want to lose you as a client, so they might low ball the rate a little.  It doesn't matter if they put this quote on the good faith estimate. It's just an estimate on a piece of paper that until you have a property and have locked into this rate, some loan officers won't honor this estimate. And in order to secure this rate, you should have been given an interest rate lock-in agreement.

Overall, what you think might be the best, might not be the best. Shopping and comparing is not always easy and needs to be done on the same day. What I want to talk about is your mortgage payment and what you should be thinking about.

 

 

balancing mortgage payment & purchase price

 

It can be a balancing act when you are trying to get the lowest interest rate when your main focus should be what type of mortgage payment that you would be comfortable with. One of the first questions that I ask is what kind of mortgage payment you would be comfortable with, or at least a range. I have been criticized by a few loan officers in the past for mentioning this and they had their own reasons. But believe it or not, about 95% of the buyers that I speak to, already have a quick idea. This shows that they have been pro-active in their thinking and not trying to buy the most house that they can afford.

A quick lesson in mortgage interest rates.  Sure, the lower the rate, the lower your mortgage payment. But should it really matter if you tell me that you are comfortable with a $2,500 mortgage payment and I tell you that your interest rate is 15%? Sure, it would mean that you could only buy x,y,z house. But your main focus was on the payment that you are comfortable with. 

 

 

mortgage interest rates

 

In my opinion, interest rates can play a mind game in several ways.

Many people in our industry have been told to rate. Too many people get hung up on trying to get the lower rate. Sometimes in your mind, a lower rate means that you can afford that payment. When in reality, you should start with what payment you can afford.

Another issue is that some consumers try to out do their neighbors and friends. It becomes bragging rights, in regards to who got the best deal. Unless you both pull out your credit reports, you HUD-1 settlement sheet (to see how much you paid), and bought the exact same house; this still won't tell you who got the best deal. 

Lastly, each consumer is different. There is not one person out there that will ever have the exact same scenario as the next. And 2 months down the road, who can say that the rates would be the same or that they are the same.

 

 

ADVICE : Trust the professional that you decide to go with. Always ask questions and if you don't understand something, don't hesitate to ask. "No question is a bad question." 

 

 

 

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Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Monique Hailer 07/20/2009 12:59 PM
Topic:
Lending / Financial
Location:
New Jersey Camden County Turnersville
Groups:
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Mortgages
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1st Time Buyers
The FHA Mortgage Group
Tags:
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Rainer
42,760
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Huge difference between quoting rate at PAR, and qouting rates and closing costs at the "going" rate around town!

Regardless, the most important factor involved with quoting a rate in ANY case, is soley based on the number of questions you ask a borrower, to determine what their ACTUAL needs are!

Often times, people dont EVEN KNOW what their own needs are, until we as professionals, plant the seed!

thanks! -  Nice job...Darin

Jul 20, 2009 03:15 AM #1
Rainmaker
592,140
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jeff,

It's smoke and mirrors!

"The only protection the consumer has is the personal intergerty on his Loan Originator!"

"It's just an estimate and doesn't matter until you have a property and have locked into this rate."

Just an estimate? If I'm the LO it matters to me! It's my "Good Faith" on the line!

Bill

Jul 20, 2009 03:44 AM #2
Ambassador
938,443
Suzanne McLaughlin
Sabinske & Associates, Inc. (Albertville, St. Michael) - Saint Michael, MN
Sabinske & Associates, Realtor

Jeff, I wish you were here!  You explain everything so succinctly and make it understandable.  The more people like you out here, the better.  Thanks.  I'm printing this off and taking it to opens with me.  Best wishes!!!

Jul 20, 2009 04:13 AM #3
Rainmaker
2,164,805
Rebecca Gaujot
RE/MAX Vision Quest - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Jeff, thanks for the clarification...great job!  I am forwarding to my office.

Jul 20, 2009 04:58 AM #4
Rainmaker
167,518
Naoma Doriguzzi
Virginia Beach - Virginia Beach, VA
New Media Director

I say so "when you say you want a lower rate - you mean you want a lower mortgage payment right? "  I think it always gets them.  So I show them how to get a lower payment.  Show them the benefit of the loan that they are getting!

Jul 20, 2009 05:17 AM #5
Anonymous
Matt Freeman

Thanks Jeff! I have been saying this for years. I am glad that you put it out there. The bottom line is does the payment work for me and my situation. Is it a good loan. You can have in the 4's if you want an arm. Is the rate worth having an arm. I wrote dont bend over picking up pennies while dollar bills fly over you head. Thanks again for the great post.

Jul 20, 2009 06:26 AM #6
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

DARIN.... . not to confuse anyone, but I hate using the term 'par', because many don't understand this. It should come down to your goals and how much money you have. We as loan officers need to evaluate and screen our clients well.  But I do know what you are saying, so thanks.

Overall, you hot the nail on the head in your 2nd and 3rd paragraphs. As I mentioned above and as you mentioned, asking the right questions... and if I am correct in what you are saying, not just giving a rate without asking these questions.  Thanks and thanks for that compliment.

 

WILLIAM aka Bill.... . you like using that phrase, "the only protection... etc, etc."  Hey, I like it also.  But getting back to your 2nd statement. I kind of changed up what I stated, because after reading your comment, my sentence didn't sound as good... I didn't mean it that way.  And yes, as a loan officer, that good faith estimate should mean a lot to you... or to me. But I would have to bet that at least 60% of the loan officers out there don't feel the same as you and I do.  I know some that I use to work with or hang out with that would actually tell me..."hey, it was only a good faith estimate, things change."... and they would raise fees and or rates. So, again, not everyone feels the way that you and I do.  Hence why I write about this, because people need to know... and maybe have an idea or a clue when speaking to others.  thanks for your input, because it made me reread my one statement.  thanks

 

SUZANNE.... . hey, maybe I can visit.  ;o)  Seriously, I am not licensed in MN, but would it make a difference?  I now get some referrals from realtors in NY, MD, and FL.  So I don't have to be in your backyard.  Overall, I do love to educate... and I truly thank you for those kind words and thoughts. thanks

REBECCA... . my pleasure.. and please do. Never hesitate to forward anything of mine.  thanks

NAOMA.... . I would agree with that.  Of course, to get a lower payment, you would need to lower the rate... or, just buy less. Sometimes people don't have the money to pay the rate down, not unless you put them into an arm, which a 5/1 arm is priced very well right now.  People need to be shown the true value.  thanks

MATT.... . it's good to see and hear other loan officers such as yourself preach and teach payment, and not just rate. We do need to educate and explain the value of the dollar and rate. The loan officer that kind of attacked me on this issue,... she accused me of being like a car salesman, because I sold payment, to give them a higher rate based on their payment, so I could make more money. I laughed and told her, if you were able to think that up, then you are probably the person that uses this against someone as myself to make more money on a client. Besides, I don't have time to think this way, because I do value my clients and I truly believe in showing that real value. Thanks for your feedback and input.

 

Jul 20, 2009 06:46 AM #7
Rainer
16,794
Joanna Quan
Keller Williams Realty - Alamo, CA
Realtor, SRES, Notary

Jeff

Thank you for this post.  I chuckled when you talked about interest rates being bragging rights for the neighbors.  It is so true and I know lots of owners that are so proud of themselves when they talk about their rates.  But if you in factor in closing costs , etc.  How much are you saving are you saving over the long term?

Jul 20, 2009 06:52 AM #8
Rainmaker
400,261
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

Again, great information. Many people get stuck on the Interest Rate. A slight change of .125% or .25%... sure, it makes a difference, but it should not be a deal breaker. In many cases, the slight change in rate only increases or decreases your payment $25-50 a month (can be more depending on your loan balance). But its not enough to wait out the market and see if the rate comes back down. I still have plenty of people on the fence thinking they know the market... and will wait until it comes back down... Really??? The PROS don't know exactly what is going to happen, what makes them think they can tell? Anyway, decisions should be based on what the payment is not the rate itself... within reason of course.

Jul 20, 2009 09:45 AM #9
Ambassador
574,364
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Jeff: Thanks for the post. I agree with you about educating and believe you are good at it. I wonder sometimes about asking how much people can afford. That's what we're asked at the car dealership and I would hope we're not the same as the car salesmen. No offense to car salesmen. I just think we are on a higher, more professional level. That being said, I think its important to give the customer choices. This post points that out. Thanks again!

Jul 20, 2009 09:49 AM #10
Rainmaker
183,081
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Jeff: Bragging rights on rates are like women bragging about their weight.

Just because you have the lowest weight does not mean you have the healthiest body.

 

Jul 20, 2009 12:07 PM #11
Rainmaker
303,501
Monique Hailer
CENTURY 21 New Millennium - Midlothian, MD
Waterfront Specialists!

Great Post and education for Realtors as well as consumers. Thanks!

Jul 20, 2009 12:56 PM #12
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

JOANNA.... . you hit the nail on the head. So many brag, but I bet not all of them paid equally, and those with the higher rate might have gotten the best deal. As I have stated, each client is different no matter how you slice and dice it. I wrote about it here... : I want the same deal that my friend got.

JOHN.... . that is an excellent point and I didn't break it down like that, in regards to an 1/8 of a percent and some people wait for it... but it could go up and not come back down... and then what.,. for $8 to $23 extra a month, it will now cost you $34 to $55 a month?  And yes, even the experts can't predict it, they just take a stab at it,  Thanks for the feedback and for your input.

PAUL.... . I never wonder, and if you have to wonder how it sounds to someone else, then you need to think of something else. Just my opinion.  But in regards to this other loan officer, that is what she tried to make me look like, a cars salesman and it back fired on her.  Out of about 20 loan officers commenting, only 1 agreed with her... and it was the same person that I don't care for nor do I think that person knows what they are doing. In my opinion, we can't assume what we do or ask would be like another industry that has a bad rap, a bad name. In my opinion, if you break it down, it totally makes sense in asking this question and it's easy to explain.  I will say this, those in the mortgage business that don't think this is an important question, is a complete idiot. They are the same ones that sell rate and the most you can be qualified for. And I could be here all day on this subject... and maybe I'll write a blog on this. thanks for stopping by.

JANET..... how about those women that brag about their shoes?  lol  Seriously, it makes sense.  hence why I am so about asking this question, "what payment would you feel comfortable about", as one of my first questions.  thanks

MONIQUE.... . thanks, I appreciate the kind words...

 

Jul 20, 2009 05:11 PM #13
Rainmaker
60,938
Tami Vroma
West Michigan Real Estate Specialist-Five Star Real Estate - Grand Haven, MI
Realtor, Grand Rapids MI Real Estate

Ok Jeff I have been away for a while . . .life got a little out of control  . . so I am glad you know I think your the greatest.  On some of this I agree . . they can tell the buyers a great interest rate and then wack them  in other areas to make up for it.  It is really hard to compare apples to apples because most of the time you don't know what kind of apple it is.  But the interest rate is important . . it just isn't the only thing to consider!

Jul 21, 2009 11:59 AM #14
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