As a mortgage banker since 1991, I have been asked that question thousands of times. In the past, it was a relatively easy question to answer. In the good old days of mortgage banking rates were one size fits all. In other words, if you met the criteria to be approved for a mortgage you would get the same rate whether you had perfect credit or just barely were able to obtain your mortgage approval. In addition, back in those days, your equity (down payment) and type of transaction didn’t matter like they do now days.
If you are searching the web, there is no doubt that there are hundreds if not thousands of mortgage lenders available. Often times these lenders quote unbelievable rates and terms. The truth is they are unbelievable because they are intentionally designed to mislead you into thinking you are obtaining a loan that is better than what it really is.
I have learned that the golden rule holds true no matter what business or profession we are in. As a consumer, I want honest, straight forward answers with all pertinent details upfront. In addition, I want the best deal possible. Our clients expect and deserve the same as well. Often times, clients in a desire to get the cheapest and lowest rate will fail to review all of the details to insure that the mortgage option they get is truly the best option for them.
Clients will often tell me a 30yr fixed rate is the same no matter where you go, so price is the only difference. I can assure you that price, while an important component is not the only component of a successful mortgage transaction. The truth is there are several factors that can lead to one loan being more expensive than another. This is especially true when a borrower has a down payment of less than 20%, as there is generally more than one way to structure your loan and an unskilled lender may choose to structure your loan with the option that was most expensive to you, not knowing better.
Costs are often overlooked by borrowers and are seldom discussed by lenders who are charging excessive fees in order to make rates look better. For example, Ditech.com advertises heavily on the internet as well as on television. One ad will advertise an incredible low fixed rate the next ad will offer a flat $395 closing fee. Who would not want the super low rate with low closing cost? What they fail to make obvious in their advertisement is that the two do not go hand in hand. In other words, the incredibly low rate comes with incredibly high closing cost. In addition, the incredibly low closing cost comes with an incredibly high rate. This same strategy is employed by lenders on bankrate.com as well as other companies such as Quicken loans. Yes, even some banks are guilty of misleading advertising as well.
So what is a client to do? How do you sift thru the options to insure you get the best deal possible? Simply put, if you are reading this you are already headed in the right direction. I have prided myself on being honest and have from time to time told a client to take the other deal because it was something we just couldn’t beat. Not to sound self serving, that doesn’t happen often. Over the years, I have found giving clients the best price and loan structure while showing them all of their options allows them to pick the option that is best suited for them. I just believe providing great service combined with a great price and expert advice make for a rare combination in a world filled with less than ethical business practices.
I am also asked why we don’t post rates on the internet like several lenders do. The truth is each rate quote is custom. So why do other lenders post rates and we don’t if each rate is custom? In my opinion, it is misleading to almost every client. Some clients may qualify for rates better than on the website because of their loan characteristics and others for rates worse. So what factors go into determining your rate? Here is just an abbreviated list:
- Credit Score
- Equity – Down Payment
- Property Type
- Loan Type
- Loan Term
- Number of Units
- Occupancy
- Debt Ratios
- Closing Cost
- Escrow Accounts
- Second Mortgages
- Mortgage Insurance
In addition, remember a local lender uses local vendors who know the local market. Lenders from outside of the area don’t know this market and its dynamics. In addition, often times large lenders are staffed by newbie’s who don’t know the mortgage business. These newbie’s don’t have the skill set necessary to help you make the best mortgage decision possible. A successful mortgage transaction requires the experience and advice of a true specialist with years of experience. These years of experience translate into a successful mortgage transaction for you.
Long story made short, what makes up a mortgage rate can vary from one client to another and the days of the good old one size fits all mortgage rates have long since gone away. We will give you detailed and accurate figures with all of your options explained in depth to insure the mortgage you select is the best one for you, not the best one for the bank.
Thanks again for giving The Dan Moralez Mortgage Group the opportunity to serve you!
