Who is Telling the Truth....Lender, Agent, or Mother-in Law

I'd have to agree with Gary there (even though I'm no LO) because lately, all my buyers had decent credit, some money down (one had 20%, one had 15% and one had 10%) and did a 30 year fixed....with an interest rate between 6.15 and 6.5. I suppose it's like advertising something that isn't true...like prices are going up so hurry now.

Gary is correct.  Fixed rate on a 30 year mortagage, Par rate (not paying the mortgage company a dime) is 6.25%.

Kathy, you need to know how mortgages are "priced." Everything is based on the FNMA bond, which is currently 6% trading at a discount to yield a little higher than 6% interest. If a mortgage company could make a loan at this "price" it would have no profit in it to pay their overhead or take a risk on a change in the market between funding and sale of the loan, not to mention any commission to the Loan Officer.

It is our fault (mortgage industry) that people don't understand how mortgages are priced. The confusion allows for higher prices over-all.

But now you can see that the 4.75% is impossible. A "teaser" rate maybe, or a short-term fixed on an ARM with high points, or maybe a negetive amortization loan (where the principal balance grows by the amount of the unpaid interest - the difference between the real rate and the 4.75% starter rate).

Get a good mortgage broker to refer your clients to that can "educate" them about the mortgage market.

Bill Roberts

Kathy,

Some minor varibles can change the rate a little and that depends on factors tha involve adding more risk to the loan, but overall No the rate should be very similiar to what I stated above. 

Lately, I have seen some big box lenders using some very borderline marketing tactics.  They must be in some major troubles if they are stooping to confusing the public more about interest rates.   

Kathy, it is just to get the phone to ring, just like Realtors that advertise they will buy your home if it doesn't sell. When the phone rings they get the fine print.

When the Fed applied the Fed Funds Rate Cut on September 18th, to lower the target to 4.75%, this action only affected two things mortgage: 

1. The Prime Rate - rates on 2nds like Home Equity Lines of Credit (HELOCs).

2. Indexes to which adjustable rate mortgages are tied - Like the LIBOR, index. This was one of the true intentions of the Fed, to help home owners' whose loans are about to re-adjust by slightly lowering their new adjustable rate payment.

 

Rates on the standard 30 Year Fixed Rate Mortgage and the 15 Year Fixed Rate Mortgage on the other hand are affected by the mortgage-backed securities market which is in turn affected by changes in the greater economy. These rates are affected by how the greater economy has interpreted the actions of the Fed.

For example, if you read my Weekly Market Update for the week following the Rate Cut you'll notice that rates on the 30-Year & 15-Year went up! Why? Because the actions of the Fed to cut the Fed Funds Rate raised inflationary concerns which to the end-investor in the mortgage-backed securities market means now they must charge a slightly higher yield premium (a slightly higher interest rate). 

 

So can I get a 4.75% on a 30-Year Fixed? I'm sorry it's just not plausible in today's market. The only way to get a rate that low is to obtain a Hybrid Option Arm as my friend Jason Sardi commented above. But now that you're armed with the knowledge on how the actions of the Fed really work and how the market for traditional fixed rate mortgages works really responds, you'll know not to fall for any misleading advertisements or disingenuous promises of a REALLY low fixed rate. 

Hi Kat, Good Job. You exposed the question and got some great answers. All the good mortgage brokers distance themselves from ads like this. So do good law firms distance themselves from the ambulance chasers. I wish we could guide everyone and be succinct about it but with all the conflicting messages, some consumers still want to believe that the good ole American Pie is till baked in a small country kitchen. One pie at a time. For those of us that have had a piece of that pie, it is hard to surrender the beautiful dream for the new reality that is often embraced by disception.

No es verdadero ni justo dicir que uno puede obtener un interes tan bajo y fijo! Ahorita le voy a decir por que.  

Cuando el fed aplicó la cortada de la tarifa de fondos de septiembre el 18, para bajar la blanco a 4.75%, esta acción afectó solamente hipoteca de dos cosas: 

1. La tasa preferencial - las tarifas en 2nds tienen gusto de las líneas caseras de la equidad del crédito (HELOCs).

2. Índices a los cuales se atan las hipotecas de tarifa ajustable - como el LIBOR, índice. Éste era una de las intenciones verdaderas del fed, de ayudar a los dueños caseros que préstamos son alrededor reajustar levemente bajando su nuevo pago ajustable de la tarifa.

 

Las tarifas en el estándar hipoteca de tarifa fija de 30 años y la hipoteca de tarifa fija de 15 años por otra parte son afectadas por el mercado de seguridades (mortgage-backed securities) que alternadamente es afectado por los cambios en la mayor economía. Estas tarifas son afectadas por cómo la mayor economía ha interpretado las acciones del fed.

¡Por ejemplo, si usted leyó mi actualización semanal del mercado para la semana que seguía la tarifa le cortó notará que fueron las tarifas en el 30 años y el 15 años para arriba! ¿Por qué? Porque las acciones del fed para cortar la tarifa de fondos del fed levantaron las preocupaciones inflacionistas que al extremo-inversionista en los medios del mercado de seguridades ahora deben cargar un levemente más alto rinden el premio (un tipo de interés levemente más alto). 

 

¿Tan puedo conseguir 4.75% en 30 años fijados? Estoy apesadumbrado que no es verdadero ni es justo en mercado de hoy. La única manera de conseguir una tarifa tan baja es obtener un brazo híbrido de la opción como comentó mi amigo Jason Sardi arriba. Pero ahora que le arman con el conocimiento en cómo las acciones del trabajo del fed realmente y cómo el mercado para las hipotecas de tarifa fija tradicionales trabaja realmente responde, usted sabrá para no caerse para cualesquiera anuncios engañosos o promesa falsa de una tarifa fija que dicen que es REALMENTE baja. 

Kathy, another deception. I would think that the public has got to be sick of it by now. I know I am. At some point the almighty dollar has to butt heads with integrity and I'm hoping integrity wins.

Kathy...I know how it feels to be put in the position of trying to back what you say without dissing the other guy...just copy this page. That should do it! Great post!

I have been disgusted with the whole lending advertising system for a long time. I wish there was a way to regulate it. The problem is that it is ALREADY so highly regulated that we have stacks of regulation-mandated paperwork that no one understands and therefore everyone ignores. And none of it kicks in, even if a buyer can understand it, until the buyer is "in the door" and getting a good faith estimate. What we need is some truth in advertising regulation.

Comment about the good lenders distancing themselves from this is correct, but if it's on yahoo or late night TV, it's going to confuse people.

Hi Kathy,
It really is confusing to the general public (and me) when this type of ad is put out.  You know how Publisher's Clearing House  had to add the statement "Purchases do not increase your chances of winning", I think some type of statement needs to accompany all mortgage rate ads.  As always Kathy, you brought an interesting post which sought the truth and I think you definitely got it.