“Today’s Interest rate” – How to Shop for Interest Rates Smartly

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

shopping for today's interest rate

 

Shopping for Mortgages & Shopping for Interest Rates Smartly

You now want to buy a home and need a mortgage. You would think it would be easy to call around to mortgage companies and ask, “What is today’s interest rate”. Sounds simple, right?  Au contraire mon frere…. On the contrary.

There are a few misconceptions that many have when shopping for interest rates.

  • That all lenders have one basic rate to offer
  • That big lenders or big banks have better rates than smaller lenders and can give discounts
  • That referrals will get you a better interest rate

 

 

All lenders have many different types of interest rates, which is dependent on many different factors. The end result, all rates should be relatively close, as long as you aren’t being deceived or that your rate will be baited and switched. Why should interest rates be the same or very close? Because we all get the rates from basically the same place, which are dictated by investors on Wall Street.

Larger Banks/lenders vs smaller lenders – I just heard from a potential client shopping for a mortgage that her realtor told her that BofA can give her discounts on the rates. First off, this coming from a realtor that is speculating. This is a blanket statement, because again, way too many factors involved when determining interest rates.  Food for thought… Just because a bank or lender might be servicing your loan from the get go, doesn’t mean that is how they can offer lower rates. In reality, even that bank or lender that is servicing your loan, has sold bits and pieces of it to other investors. Big Bank A might own 70 percent of your loan, even though they are servicing it, yet two other investors might own the rest of the loan. Hence why some foreclosures were becoming difficult at times, trying to determine who owned how much of the primary mortgage.

When it comes to getting a referral from a friend, co-worker, realtor, etc; one just can’t assume that all will go well and that you will get the best deal.  I have three new stories just from the last several weeks that would make you cringe. Story A – My sister referred me to a friend of hers after hearing of her most recent mortgage story. Back in December, this couple tried refinancing and was promised an interest rate of 4.5 percent. After about 2 months, they finally found out that this loan officer never locked in their interest rate. And this was a referral from a friend. Just recently, they got another referral from someone at their church. I happened to get the call 3 days later and after reviewing the different cost sheets, I was about $5,500 more in total costs. But wait, the other loan officer was very misleading in what they estimated. This person didn’t calculate their 30 days of interest in the pay off, was $100 lower per month on the property taxes, only escrowed 3 months worth of taxes when I estimated 5 months, and two other items. All of these items aren’t lender related, but 3rd party estimates. After it was all said and done, I was about $48 off. Yet this person had an interest rate that was 1/8 percent lower in me. And guess what, there was one important question that wasn’t asked by the other loan officer, in which carried a pricing penalty from any lender/bank for this particular loan.

 

 

Many different factors involved when shopping for a mortgage or shopping for an interest rate

Goals – What are your goals, for the next 3, 5, 7, and 10 years. This could help a good loan officer determine if you should pay points or not, or what mortgage program to put you into.

Credit scores- Your credit scores are a huge factor when it comes to determining your interest rate and or the penalties because of your credit scores, aka fico scores. – Understanding credit scores – Read the series at the bottom

Interest Rate Lock-In Period- Such an important detail that is usually not mentioned to borrowers when shopping for that all almighty interest rate. How long is my interest rate good for and when can I lock it in should be talked about. I once lost a deal to another loan officer who was beating me out by 1/8% and $500, but found out that he couldn’t lock his rate in until the appraisal came back. This could be a difference of 3 to 7 days, and interest rates could get worse. Besides, the loan officer in a few days could just raise the rate an 1/8% and say that rates got worse, but did they? Key Point – You need to shop on the same day, because rates change daily, sometimes twice in one day.

Loan Amount – Believe it or not, the size of the loan amount will have some impact on your interest rate. All lenders have a basic profit margin that needs to be met on each loan. The lower the loan amount, the more points it may require or a higher rate that pays more premium back to the lender.

Size of down payment – This holds more true for conventional loans, because Fannie Mae and Freddie Mac have pricing hits depending on how much you put down and what your credit scores are. Please read : Conventional pricing hits

 

 

Conclusion – One size does not fit all. It might seem simple, like when buying a new television, as long as you know the model that you want. Then all you have to do is pick the 3 nearest stores and see who has the lowest price. As you can see, when shopping for an interest rate, there is a lot more involved. Something that I have witnessed 3 times in the last 2 weeks are borrowers that weren’t locked into their rate and then rates changed on them. The moral to this story is that any loan officer can bait you with a little better rate at first, if they aren’t going to lock you in at time of shopping or mortgage application. 

Lastly, just because one has advertised a low rate, doesn’t mean it’s true. All of the factors that I mentioned above need to be found out before offering any such rate.

On another note, I have included some very important articles below that should help you better understand the mortgage shopping process.

 

For more info regarding shopping for interest rates and shopping for mortgages, please read :

 

 

Posted by

_____________________________________________________________________________________________________________________________

 

 

follow Jeff Belonger on Twitter

 

The FHA Expert's fan page on Facebook     Add Jeff Belonger to your network @ LinkedIN

                                                                            FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

Mortgage Myth Busters

 

______________________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

HUD

 

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

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

close

Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Deborah "Dee Dee" Garvin 06/10/2011 04:20 AM
  2. Ritu Desai 06/10/2011 05:58 AM
  3. Susan Haughton 06/12/2011 01:06 PM
Topic:
Lending / Financial
Location:
New Jersey Camden County Cherry Hill
Groups:
Realtors®
Mortgages
All About Mortgages/Mortgage Networking
The Lounge at Active Rain
POSITIVE ATTITUDE for the Weary Soul
Tags:
interest rates
low interest rates
todays interest rates
shopping for interest rates

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
158,800
Deborah "Dee Dee" Garvin
C2 Financial - San Diego, CA
C2 Financial

Jeff,  Suggested!!  Great job of explaining rates...from front to back!  The "What's your rate" conversation has baffled me for years!  Moreso, I loathe (okay, strong word) mortgage rate daily drops and mortgage rate calculators....they are all basically "bait and switch" tactics.  As we both know, there are so many facts that are relavent in a final rate that it is simply impossible to send out blanket rates and call it a day!

Jun 10, 2011 04:17 AM #1
Ambassador
2,740,947
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I have yet to see a home buyer who could gain any advantage for themselves by "shopping" for a mortgage".  Invariably, they almost always gravitate to Internet lenders who stress nothing but rates, which is about half of the information a buyer needs. 

 

Jun 10, 2011 04:18 AM #2
Rainmaker
592,907
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jeff,

You left out the big lie! "APR will tell you witch loan is best."

In a pig's eye it will! APR will always favor the highest cost lowest interest loan. Even if you have the extra cash at closing, if you have the option these loans can be extremely expensive.

An honest LO can help you look at the total cost out of pocket and the reaming loan balance for the time you intend to own the property.

Bill

Jun 10, 2011 04:51 AM #3
Ambassador
749,666
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

DEBORAH... . just as it is for you, "what is your rate" irks me also, especially when the loan officer just gives rate and nothing else.  Bill below brought up another good one, when people compare APR... not a good idea. And thanks for reblogging this post... and for the polite compliment & for suggesting it... we shall see. ;o)

LENN... , any loan officer that just gives rates and hardly asks any of the other questions mentioned above, or gives specific info out... that borrower more in likely will be doomed one way or another. I have soooo many examples of real life stories that I have heard from other borrowers that got burnt. thanks

BILL... . this post was too long to begin with, but in a few of my links regarding shopping for interest rates, I do talk about APR. I always highly advise people not to shop APR, especially when trying to compare FHA to Conventional. The FHA upfront MIP is calculated into the APR, which is misleading, if added onto your loan. thanks for bringing this up.

 

Jun 10, 2011 05:02 AM #4
Ambassador
1,924,955
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Oh Jeff how true this is ..and how about the people who shop on line ??? Now that is scary!

Hannah

Jun 10, 2011 05:26 AM #5
Rainmaker
751,786
Ritu Desai
Samson Properties - Ashburn, VA
Virginia Realtor-Fairfax/Loudoun/PW-703-625-4949

Jeff, absolutely agree. I recently had a  buyer who shopped and shopped...finally he locks with an internet bank and all the night mare starts....he wanted to switch lender but it was too late in the game.

Jun 10, 2011 05:57 AM #6
Rainmaker
1,793,677
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

Jeff, you are so right and i always pass your blogs onto buyers...i usually let the insistent online shoppers go & they never seem to buy either...i see them at open houses a year later...

Jun 10, 2011 06:10 AM #7
Ambassador
4,009,328
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Jeff

An excellent overview of what buyers need to consider. We hear all the time that "I'm shopping around for the best rate." And I always cringe when a buyer seems only focussed on on-line shopping.

Jeff

Jun 10, 2011 06:33 AM #8
Ambassador
749,666
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

HANNAH... . shopping online or with a local lender.... I see this all over the place.  Even with past companies and or loan officers that I have worked with. I would only say about 10% of all loan officers, even not on the internet, don't properly disclose or talk about the issues that I mentioned above.  Just my opinion and from what I see and hear from previous borrowers.  thanks

RITU... .  as I mentioned to Hannah, these issues aren't just with internet lenders or banks... local loan officers... even my stories and examples are those that dealt with a referral, someone local...

GINNY... . thanks for the kind words and I hope my posts help your buyers out.

JEFF... .  I always cringe big time when I hear someone shopping for a rate, and especially when I find out that even half the things I mentioned above where never mentioned... like, when the rate could be locked-in... wow.. shop shop shop... and you found the best rate, but I didn't tell you that rate can't be locked in now.. LOL  Yes, as I mentioned in one of my stories, this happened to a borrower... and by then, the borrower usually stays with that loan officer anyhow... that part kills me. Mainly because they just don't want to start all over... Regarding the internet shoppers... please read my comment to Hannah.. I even see these same issues with local referrals and local loan officers... because I get calls from all over the US, I hear many of the same stories, and believe it or not, more than 50% are local loan officers and or from referrals... now that really scares me, yet shows me on how many truly qualified and professional loan officers there are,,,,, thanks

 

Jun 10, 2011 08:33 AM #9
Ambassador
647,410
Marilyn Boudreaux
Marilyn Boudreaux, Century 21 Bono Realty - Lake Charles, LA
Lake Charles LA Century 21 Realtor

excellent overview Jeff this will be helpful for those buyers out there to understand in and outs of mortgages

Jun 10, 2011 12:26 PM #10
Ambassador
1,041,795
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Jeff, certainly very important information for buyers! And how I want to cry when they have been online getting a mortgage....

Jun 11, 2011 12:22 AM #11
Ambassador
533,485
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

You nailed some valid points, Belonger.  Those shopping on rate alone are shopping on dangerous grounds.

Jun 11, 2011 02:46 AM #12
Ambassador
749,666
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

MARILYN.... .  Thanks.. I like how this all came together. Sure, it was a tad long, but I am finding the consumers will read it all, and want it all... so many here on AR just skip on by when something is too long. Might be my opinion, but I have tested it and it holds true.

ANDREA... .  I hope many get some good use out of it. But many comments such as yours talk about online loan officers/lenders. I get that and understand it...  but all of my examples and stories were those loan officers that were referrals and or local. I am seeing this more and more.

JASON... .  I just got a call the other day and the guy came right out and asked, "what is your rate and how low of a credit score can you do."  I asked how many people he talked to and he said I was the 5th. I said, did you get rates from all of them... and he said yes. I started to ask him questions and he said that most didn't really ask any questions. I gave him some feedback and he said he would be in touch. Hey, I am a little slow in business right now, but I am not chasing that one.  And thanks for the kind words...

 

Jun 11, 2011 03:29 AM #13
Rainmaker
1,027,000
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

As usual, you hit it out of the park with the amount of truly good information you include.  Am suggesting and reblogging because this is such useful stuff. Thanks!

Jun 12, 2011 01:05 PM #14
Rainmaker
427,439
Leslie Ebersole
Swanepoel T3 Group - Saint Charles, IL
I help brokers build businesses they love.

Those comparison sheets are pretty useful if they are filled out correctly. I love making a client make an internet lender fill one out. Never hear from their internet guy again.

Jun 14, 2011 03:01 AM #15
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
749,666

Jeff Belonger

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans
Ask me a question
*
*
*
*
Spam prevention

Additional Information