Rates & Closing Costs at Various Lenders
I am probably asked about rates and/or closing costs more than anything else. Sadly, this isn’t the right question to ask. Why not? Nowadays, most every lender out there sells to one or all of the big 5 investors, FNMA (Fannie Mae), FHLMC (Freddie Mac), FHA, VA or USDA. Those investors recruit money to fund the loans they buy from us typically from selling something called mortgage backed securities, or mortgage bonds. Who buys these bonds? Probably you, in your 401k, mutual fund, IRA, etc. But that’s another topic for another day. As the buyers of the bonds purchase them, the price is literally what sets the interest rates and costs each day. As the prices go up, rates go down. And vice versa.
Do you understand that rates and costs are inseparably connected like two sides of a teeter totter? The lower the rate goes, the higher the costs go? That’s called buying down your rate. But the opposite is true as well, you can move your rate upwards to reduce costs, potentially down to $0. So when you hear a lender advertise the “lowest rate” you can know that they will have the highest costs as well. Or if you hear one advertise a no closing cost loan, you can be sure their rate is highest. But if you equalize every lender by picking the same closing costs or the same rate, you’ll find that the other side of the teeter totter is about the same as every other lender. Why? That’s what I was explaining above.
Rates change daily as the price of those bonds vary each day. As they change, it’s like the fulcrum to that teeter totter moving up or down. But important to note is that ALL lenders’ rates will move with the market so if one lender’s rate drops, so did everyone else’s. Make sense? Again, some lenders angle their teeter totter to advertise a low rate or a low closing costs (but not both at the same time), but if you “adjust” their rate to be the same as everyone else’s, for the same time of the same day, you’ll find that all lenders’ rates are about the same with about the same costs.
Seems like a lot of work to arrive at the conclusion that everyone’s the same in the end, huh? I agree, but there are a few other things that ARE very important to note between lenders. I’ll address that in a moment, but first, let me finish the above. There are those 5 main investors that most lenders sell to. But there is still their own money, their portfolio that they can use. This 6th source of money is going to cost you more though if needed. Think about it, if the banks can lend someone else’s money and make money, why would they tie up their own funds (potentially for years)? They will use their own funds, but at a higher profit to them which means a higher cost to you. There are places for that though. When you can’t qualify for one of the main five, then getting a loan through a 6th channel can still get you what you want. I am aware of several sources here in SLC that lend outside the normal box, but like any good lender, I’ll try first to get you the best deal by getting you into one of the first five options before exploring the sixth option.
So if lenders all have the same rates, how do you shop between lenders and does it even matter? YES! It matters. Have you ever heard someone share a horror story about when they bought a home? If I were shopping for a home loan, I’d ask a few questions of the lender.
Where’s your underwriter? The underwriter is the decision maker. Most banks put them far away from production staff. Since 2011, I’ve had the underwriter right on site in my same office. It makes a HUGE difference with communication and getting hard things done. I’d never work with a lender that didn’t have their underwriter right there. Why should I if rates are the same and other lenders like us have it?
How long have you been a mortgage loan officer? Don’t just ask how long they’ve been IN the mortgage industry, but how long have they done this exact job? I started in 2003 as a mortgage loan officer. I’ve been sent on several trips and won many awards due to our ability to orchestrate a great experience for a large number of clients and friends. Been doing this long enough to know better I guess, haha.
What can I expect from you for returning my calls, texts, or emails? This you’ll ask, but will need to observe. My commitment is 2x/day to return all communication. We don’t go to lunch or go home until all communication has been returned. If you ever detect anything else, please point it out to me. It will not happen twice. It’s long been a passion for me to let all parties know what’s going on in a transaction as frequently as possible, at least weekly. Anyone that’s worked with me can attest to that, Title companies, Realtors, other Lenders, Clients, etc.