I am often asked by clients, “What is your rate?” Interest rates are a very interesting subject to most people when financing a home. Everybody seems to want the “best rate”. What rate do you want? Or, “What is more important to you a lower cost loan or a lower interest rate loan?” Many buyers are solely focused on interest rates without considering the closing costs and actually having enough cash to close. They are also not aware of the inverse relationship between interest rates and costs or fees. Here’s an example to illustrate the difference: Is a 5.00% interest rate better that 5.25% interest rate? Let’s see. The 5.00% interested rate loan comes with an “origination fee” of 1.0% ($2,000) on a $200,000 loan. The 5.25% interest rate comes with no “origination fee” The difference in payment (principal and interest) is $30.77. I’ll ask the borrower, “Do you want to pay an additional $2,000 to close this deal, or would you rather save the $2,000 and pay an extra $30.77 each month?” Most of my first-time home-buyers struggle to come up with the minimum down payment let alone closing costs so the answer to this question is pretty obvious!