Interest Rate Shopping

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Real Estate Agent with Remax 200 Realty BK645994

I am working with a couple buying their first home together here in Orlando, and yesterday they spoke with a couple of lenders about rates and loan programs. Both lenders were recommending FHA as an option for them, but the interest rates they were quoted were significantly different. One rate was around 7.25%, and the other rate was 6.5%. On a $100,000 loan that is a $50.11 difference in the monthly payment. The difference between $632.07 and $682.18. They will be borrowing more, so the difference could cost them a lot more than $50 a month.

When money is tight, like it is right now, you need to shop for it. I do expect that those rates will be climbing, and I also expect rates to be somewhat volatile over the next quarter. You see what the stock market has been doing, but most people do not watch the bond markets which have also been having some ups and downs. They do not swing as wildly as stocks, but you can see from the example above that a small change can have a significant effect.

www.DavidWelch.com, Orlando Real Estate Blog

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Rainer
120,494
Ron Wysocarski
Wyse Home Team Realty - Port Orange, FL
CEO, Pricing Specialist

Hopefully your buyers received a GFE from both lenders. If the quotes were comparing "apples to apples", then the choice is pretty easy. If there are origination fees or discount points that differ, you may need to look further into the true cost of the loan.

Oct 14, 2008 12:10 AM #1
Rainer
26,024
Manolis "Manny" Sfinarolakis
Keller Williams Realty - West Hartford, CT

It is good that you track these markets so well.  Your clients will need your expertise and your fiduciary responsibility to inform them of the best options for their situation.  Good luck!

Kind Regards,

Manolis

Oct 14, 2008 12:13 AM #2
Rainmaker
368,263
Dean Moss
Dean's Team - Keller Williams Realty Partners Chicago IL - Chicago, IL
Dean's Team Chicago IL Real Estate Team

David -

I don't know why the two rates would be that far appart.  Like Ron suggests, the lower rate loan might have some added costs that the less-expensive loan officer is glossing over.  I would check, carefully, the Good Faith Estimate, in any event.

DEAN & DEAN'S TEAM CHICAGO

Oct 14, 2008 12:14 AM #3
Rainmaker
218,744
David Welch
Remax 200 Realty - Orlando, FL
#OrlandoRealEstate Optimist

They were supposed to both be quoting 0 and 0. I always recommend to my buyers that shop around to bring me the good faith estimates, and I will help them figure out what the true cost differences are. Sometimes you have title and insurance estimates that vary significantly.

Oct 14, 2008 04:29 AM #4
Rainmaker
218,744
David Welch
Remax 200 Realty - Orlando, FL
#OrlandoRealEstate Optimist

They were supposed to both be quoting 0 and 0. I always recommend to my buyers that shop around to bring me the good faith estimates, and I will help them figure out what the true cost differences are. Sometimes you have title and insurance estimates that vary significantly.

Oct 14, 2008 04:30 AM #5
Rainmaker
218,744
David Welch
Remax 200 Realty - Orlando, FL
#OrlandoRealEstate Optimist

They were supposed to both be quoting 0 and 0. I always recommend to my buyers that shop around to bring me the good faith estimates, and I will help them figure out what the true cost differences are. Sometimes you have title and insurance estimates that vary significantly.

Oct 14, 2008 04:31 AM #6
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Rainmaker
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David Welch

#OrlandoRealEstate Optimist
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