How Do I Get The Best Rate?
It is NEVER about the best rate.
IT IS ABOUT THE BEST MATH, PERIOD!
There is NO other answer than that.
I was recently working with a couple with very high incomes and FICO scores. The husband was a long time friend of mine whom I told early on, that I DO NOT play the rate shop game. That I am trusted by my clients as their mortgage planner and advisor. It was not until I had gotten deep into the negotiating process with several of my investors and had developed several options from which they may choose, that I was informed that they (he), had selected another lender who claimed to have a lower rate. In fact, the rate was only 1/8th lower than mine. However, they were charging one point (1%) origination on the loan plus an additional $2,500. When I asked, "If they are charging you 1 percent to originate the loan, what was the additional $2,500 for?" He said that he was not paying for an appraisal nor a credit report.
He and I negotiated one point too but I was not charging an additional $2,500! I knew immediately what he WAS paying for. He was paying to buy that rate down! An appraisal for his home would have cost $350 while the credit report would have cost $50... if that much. So he was paying $2100 to buy the rate down 1/8th of a point! I suggested he ask them why the $2,500 fee and he still decided to go with them; This after they delayed closing his loan for 3 months which cost him a full point on his rate by the time he talked to me. BAD DECISION! Frankly, his decision made absolutely no sense financially. Still, I recognize a persons right to make a bad decision. Obviously he did not trust me.
Here is the deal. First, lower rates come with more points and fees. That's not the real issue either. There is a break even point to contend with when paying points and fees, tax deductions to figure out and your available cash. In the case of a purchase loan, points are tax deductible in the year that you pay them. That is good, but then again, so is the interest you think you are saving. With a refinance, the points are usually only deductible over the full term of the loan. That could be 30 years, making the benefits and the break even point years down the road. So why do so many lenders advertise really low rates with all of those points and fees? Because they know most consumers look at the rate, not the math. That advertising strategy works really well. How about the lowest APR? Often, the more points you pay, the lower the rate and APR. True, but not the answer. Get that loan officer/application taker to take apart each rate and fee quote to find out what the best MATH is for you, period!
It only takes a few seconds for the professionals at The Mortgage PRO! to do it. We are "Mortgage Planners" and "Trusted Advisors." After that, it's your decision.
Dollars don't just make "cents," they can make you wealthy! Trust and Integrity is EVERYTHING!
IT IS ABOUT THE BEST MATH, PERIOD!
There is NO other answer than that.
I was recently working with a couple with very high incomes and FICO scores. The husband was a long time friend of mine whom I told early on, that I DO NOT play the rate shop game. That I am trusted by my clients as their mortgage planner and advisor. It was not until I had gotten deep into the negotiating process with several of my investors and had developed several options from which they may choose, that I was informed that they (he), had selected another lender who claimed to have a lower rate. In fact, the rate was only 1/8th lower than mine. However, they were charging one point (1%) origination on the loan plus an additional $2,500. When I asked, "If they are charging you 1 percent to originate the loan, what was the additional $2,500 for?" He said that he was not paying for an appraisal nor a credit report.
He and I negotiated one point too but I was not charging an additional $2,500! I knew immediately what he WAS paying for. He was paying to buy that rate down! An appraisal for his home would have cost $350 while the credit report would have cost $50... if that much. So he was paying $2100 to buy the rate down 1/8th of a point! I suggested he ask them why the $2,500 fee and he still decided to go with them; This after they delayed closing his loan for 3 months which cost him a full point on his rate by the time he talked to me. BAD DECISION! Frankly, his decision made absolutely no sense financially. Still, I recognize a persons right to make a bad decision. Obviously he did not trust me.
Here is the deal. First, lower rates come with more points and fees. That's not the real issue either. There is a break even point to contend with when paying points and fees, tax deductions to figure out and your available cash. In the case of a purchase loan, points are tax deductible in the year that you pay them. That is good, but then again, so is the interest you think you are saving. With a refinance, the points are usually only deductible over the full term of the loan. That could be 30 years, making the benefits and the break even point years down the road. So why do so many lenders advertise really low rates with all of those points and fees? Because they know most consumers look at the rate, not the math. That advertising strategy works really well. How about the lowest APR? Often, the more points you pay, the lower the rate and APR. True, but not the answer. Get that loan officer/application taker to take apart each rate and fee quote to find out what the best MATH is for you, period!
It only takes a few seconds for the professionals at The Mortgage PRO! to do it. We are "Mortgage Planners" and "Trusted Advisors." After that, it's your decision.
Dollars don't just make "cents," they can make you wealthy! Trust and Integrity is EVERYTHING!
posted by The Mortgage PRO! @ 10:33 PM
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