Can lower mortgage interest rates play tricks on your mind? Does it help when the government advertises that they want to lower the interest rates to the low 4's? Are you sitting on the fence, waiting for these promises to happen?
Here is a great example of how you might do yourself some wrong, just because one interest rate sounded better than the other.....
I was referred a client last week who wanted to do a zero point refinance, because he will only be in the house for 3 years at the most. He was originally getting 5.375% from Wells Fargo and the best I could do was save him $980 in fees, yet keep the same rate. He decided to use me and proceeded with the mortgage. Two days later, I called him up and said that rates have dropped considerably and would you like to lock in. I was able to offer him 4.875% at the same no costs. He was very excited about the new change and said yes. As I gathered his information, I then went to lock him in. Rut row.... the market already moved. I could now only give him 5.00%, but it was only an 1/8 of a percent more, yet still cheaper from the original interest rate. When I called him back to tell him this, he was hesitant, almost like he didn't want to do it now. What to do??
The interest rate fairies were dancing in his head. 4.875% sounded like a million dollars better than just the old measly 5.00% rate. But wait, even at 5.375%, he was going to recoup his total costs in less than 16 months. With the 5.00% interest rate, it was going to take him 11 months to recoup his costs. He almost blew a good financial decision just because he couldn't brag about the 4.875% rate. And keep this in mind, that small difference of 1/8 of a percent was only a difference of $19 a month. Sure, it's $19, but at what cost? The change was semi drastic. About a $3,000 difference. A good loan officer will explain the difference to you.
The end result? I basically told him that the rates were playing tricks on his mind and showed the numbers of what it would cost to get that rate. Telling him that it was all in his mind and that he needed reality, not fantasy. Because of his goals, it still made sense, even with the rate change. The problem is that the government and the media are throwing out some many lower interest rates out to you, that can't worry about this when shopping.
Conclusion : In the first 5 minutes of a conversation, a good loan officer is going to ask you your goals and what payment that you are comfortable with. This should be asked no matter if you are purchasing a new home or refinancing your current home. In my opinion, if loan officers ignore these two important questions when interviewing you, and try to see what you qualify for the most, then you might want to second guess your choice of who you are using. Sure, in regards to refinances, they are a little different when it comes to payment. Your biggest focus should be, does it make sense? But knowing your goals is a huge part of this.
Just don't let the interest rate fairies play tricks on your mind. Don't base your decision on the interest rate, base it on payment and if it makes sense. Your rate shouldn't be used for bragging rights. Nor should a loan officer convincing you that saving $60 a month on a refinance is advantageous for you. Again, each borrower is different. And keep in mind, mortgage interest rates are different on FHA loans and conventional loans, depending on your credit scores. Please read :
- FHA Loans - USDA Loans - VA Loans -
- Energy Efficient Mortgages -
- Conventional Loans - 203 k loans -
- Mortgages -
Experience & Knowledge at its BEST !!!
For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger