Whenever I speak with a new client, I try to always ask them what is important to them in choosing a mortgage lender to work with. 10 times out of 10, they say the lowest interest rate and the lowest cost is the most important. Obviously, a low interest rate at a low cost is important, but I would beg to differ that it is THE most important thing. However, since I’m not one to argue with customers, I will give you some tips on shopping for a mortgage to ensure that you are in fact getting the best deal and, and I stress this is a big AND…working with a competent mortgage professional. A person’s home is typically their single largest investment and it’s too important to place the financing of this investment into the hands of a person who is not capable of advising you properly based on YOUR SPECIFIC goals.
When speaking with a mortgage lender, there are four questions that you need to ask them to determine their competence and their understanding of the market. If the lender is unable to answer these questions correctly…RUN- DO NOT WALK-TO ANOTHER LENDER.
Questions:
1-What are mortgage rates based on? The only correct answer is that rates are based on Mortgage Backed Securities or Mortgage Bonds. Interest rates are not based on the 10-year Treasuries. This is a common misconception as mortgage bonds sometimes trend in the same direction as the 10 year Treasury note. It’s not uncommon though for them to go in opposite directions. It’s important to work with a lender who is watching the correct indicator.
2-What is the next Economic Report or event that could cause interest rate movement? A mortgage professional should be able to provide you with this information easily. For an up to date calendar of weekly economic reports and events that may cause interest rates to fluctuate, call me, and I would be happy to provide you with this information.
3-When Bernacke and the “Fed” change rates, what does it mean…and what impact does it have on interest rates? When the Fed changes rates, they are changing a rate called the Federal Funds Rate. This is a short term rate that affects credit card rates, credit lines, auto loans and so on. First mortgage rates most often will actually move in the opposite direction due to the dynamics within the financial market. For further explanation on this, please give me a call or you can read additional information here: http://www.lenderforlife.net/Why The Fed Cut Caused Mortgage Rates to Rise
4-What is happening in the market today and what do you see in the future? If a lender can not explain how mortgage bonds and interest rates are currently moving as well as what is coming up in the near future, you are talking with someone who is reading last week’s newspaper and not someone who you should entrust your largest investment with.
Again, a mortgage professional needs to be able to answer ALL FOUR of these questions. If they can’t, find a professional who can.
The last thing that I’d like to mention about shopping around for the best interest rate is that buying an interest rate is very much like buying a stock in that until you purchase the rate (ie. lock in the rate), it is subject to change because it’s based on the market conditions at that time. This means that when you’re reviewing quotes from multiple lenders, it’s imperative that you make sure you are looking at quotes from the same day AND make sure that the loan structure is the same. There is more than one way to structure a loan and that is one variable that can affect the interest rates that are quoted.
For additional information, don’t hesitate to contact me at cdecandia@lenderforlife.net or visit my website http://www.lenderforlife.net.
