Okay, so what have you heard on the street in the last several days? I am sure many of you have heard that interest_rates were lowered. Now, I don't want to confuse you, because I want to keep this very simple and educate you from my past experiences in the mortgage industry.
I want to make one bold statement before we move forward. We all get our money from the same place. Meaning, if your loan officer works for a bank, a correspondent lender, or as a broker, we all deal with the same money at the same price. I need to make this statement because I see to many lenders or loan officers advertise that they have the best rates, no matter if the market was up or down. So many people confuse best rates with great service. Meaning, there is a higher god per se that sets the pricing on Wall Street, no matter if you are Countrywide, Wells Fargo, Bank of America, or x,y,z mortgage company (mom & pop shop), it's all the same.
Confused yet? I hope not, because that should have been easy to understand. Too many consumers focus on the best of something, easily forgetting the importance of what they are trying to accomplish, their goals, and that buying or refinancing a home is and can be emotional. And the sad part is that many of the loan officers out there know this. Sometimes willing to tell you what you want to hear and backing you into a corner, until it's too late. That you are now desperate to refinance, needing that money or lower rate. Or that you fell in love with that home and that you must have it now, at any expense. And that you will worry about the consequences of your actions later.
How do I know all of this? I deal with it weekly. I could give you real and live examples that aren't staged. Just be careful not to shop yourself out of the market !!!!
But I want to get back to the discussion at hand. Mortgage rates, rates, and interest rates.... the percentage that is charged for you to borrow on the open market per se to obtain financing for a particular property.
When rates adjust, it basically increases or decreases the amount of money circulating within the economy. The Fed is acting as the throttle and the break for economic growth and inflationary control. If the Fed can keep interest rates low, there will be more money in the economy. This type of control allows banks to either lend more money when rates are low because credit is cheaper or lend less money because the cost of credit is high.
A MUST READ.... DON'T STOP NOW !!!
Conclusion : Rates were lowered a week before the Fed's regularly scheduled meetings because of the foreign market's decline of more than 9%, which influences the U.S. market. There was fear and speculation that the US market would open up, down over 500 points the next morning. This did happen and at one point, rebounded. The market was correcting itself for several reasons. My concerns aren't why it happened, just because the news reported that the interest rate dropped, but because lenders are now advertising it all over the place. My fear is that they will use this news to get you into the door. Do you know what happened the day after this great news? Rates went right back to where they were the day before and in some cases, higher. I locked 7 clients into yesterdays rate, because I know better and because I have been through these quirky markets before. I know many lenders didn't lock their clients in and might now be playing roulette with your rates. Some will honor your rate locks, others won't. And if you were quoted great rates just the other day, check again. If they tell you that nothing has changed, they are lying to you. The market doesn't lie, so check it out yourself.
Overall, will rates come back down again when the Fed meet next week? Maybe, maybe not. It wasn't the chance that I was willing to take and I even told this to my clients that were shopping. Many companies are still promising lower rates, not to lose that consumer as a client. And because they can bascially state 1 to 5 excuses why your rate moved when you finally make your decision. It's just the facts of life. My advice, go with someone that can explain all of this to you. Go with someone that will call you or e-mail you when the good changes happen and when the bad changes happen. Why? Because the news of rates changing for the worse won't hit the general public until next week. The market corrects itself when it wants, but many loan officers don't share the negative news in fear of the consumer running away. If you didn't lock in 24 hours after the news, you might not see anything positive for 2 to 3 weeks, and this is just an educated guess backed by 15 years of experience in the mortgage business. It's called, lenders hedging high to recoup previous losses. They adjust and readjust at a blink of an eye, keeping some of the profit that was lost in the last quarter.
And a little FYI..... if you are putting less than 30% down and your credit score is less than 680, your best mortgage option might be a FHA mortgage. Don't let anyone else tell you differently.
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Jeff - wasn't difficult when we first started that often a drop in the interest rate means an increase in the loan rate. Have seen it time and time again. Reason why it was so hard to learn for us is because it doesn't necessarily make sense, and we all very much understand that reality, like government, doesn't have to.
thanks for your efort here. It's right on and appreciated.
cheers