Interest rates remain low, and have been low, for years it seems like. Although a consumer may complain about getting 5.625% instead of 4.875%, rates have been in a very tight range for quite a long time. We have not had a rate with a ‘6′ in front of it for years. And I can remember when 6% was thought to be a very low rate!
Of course, the whole discussion of rates has to incorporate the price of what one is financing. Read the rest of this entry »
Just when everyone thought rates were on a straight trend line pointing down! A few days ago, on Friday, December 4, 2009, there was a fairly bullish jobs report. Bond yields jumped up, hence, interest rates rose a bit. For a few days, I was locking-in clients interest rates at 4.75% with zero points on a 30 year fixed-rate conforming loan (which is a loan that is equal to $417,000 or less). Read the rest of this entry »
Shopping for a loan is easy, kind of like window shopping. You poke your head in the window, take a look, maybe you go in the store and ask a few questions, maybe you go to another store, who knows. You are not obligated to buy from anyone, and you are going to check every source you can TO GET THE BEST PRICE. It’s all about the best price after all (he said sarcastically).
It is all about the best price, as long as you get what you wanted in the first place. And this is the problem in shopping for goods and services, people are so focused on the price, they lose of track of making sure they are going to get what they need. You have to ask a lot of questions, and be asked a lot of questions, to ensure the process will go smoothly and to ensure you will get the price being promised. If you are not being asked a lot of questions when you ask about a mortgage, something is wrong. Read the rest of this entry »
Is there a free lunch, or isn’t there? My last post about mortgage shopping suggested that interest rates are only a slight bit different (1/8%) from lender to lender, and that the consumer needs to focus on performance, customer service and execution more than price. But no one does, do they? And we create our own customer service problems by seeking the lowest price, and expecting the best service. It happens with mortgages, movers, furniture, contractors…you name it. We have been creating our own service and product hassles since the dawn of time.
And the reason I have chosen to write about this again is a recent client who asked me to serve a piping hot free lunch. How you ask? Read on… Read the rest of this entry »
Whether a consumer is calling a bank, a mortgage banker or a mortgage broker; all mortgage providers fund their mortgages through the same sources. Because of this, mortgage rates are very close from one lender to another. I broker to over 60 banks, and have never seen rates vary by more than 1/8%.
The purpose of “advertised” rates is to get the phone to ring. I am sure no one is surprised to find out that the ad for the cheap Mercedes is not real, and that if you want all the options, powerful engine, wheels and goodies you see on the picture in the ad, the cost goes up quite a bit. Read the rest of this entry »
It used to be that if you locked in an interest rate, you’d have a chance at a lower rate later in the transaction and prior to closing via a “float down”. A float down may, for example, allow you to initially lock-in a 6% 30 Year Fixed rate with 0 points, only to float down to a 5.5% 30 Year Fixed rate with 0 points later in the transaction if rates fall during the processing of the loan.
Different banks, lenders and brokers have different terms to put a float down into affect. Some lending institutions will not float down at all, and the rate you initially lock-in is all they will offer you no matter how rates change. There logic is that if rates rose 1%, and they called you to split the difference and take a higher rate by .5%, you certainly would not, so why should they offer you a lower rate if rates fall. Read the rest of this entry »
When it comes to interest rates, the Federal Reserve is fairly irrelevant. All it does is adjust its rates to those set by the market. If you plot the yield on T-bills against the discount rate, you will see that the former leads the latter. Despite all the rhetoric about it, the Fed has not kept rates artificially low, just as it did not make them soar in the 1970s. The market sets the rates, and the Fed follows. Read the rest of this entry »
I get a lot of excited questions based on information people see on the latest “average interest rate” news. This data is usually published monthly by the media, so it is a regular source of misleading data.
The average interest rate is a compilation of a lot of different interest rate quotes and variables, that do not apply to everyone’s exact situation. The average interest rate is a national average figure, with interest rate quotes from across the country that may not apply locally, and many times also includes interest rate quotes with points. But most consumers do loans with 0 points. Hence, the “average interest rate” you see on TV or in the newspaper always looks artificially low. Read the rest of this entry »
Annual Percentage Rate, or APR, is a legal requirement that mortgage lenders must disclose on one of their disclosures called a “Truth In Lending” statement. It is not a useful way for the consumer to measure the cost of a mortgage.
It is supposed to be a way for lenders to express their closing costs in terms of a percentage. The thinking is that consumers can simply ask lenders for the APR, and can quickly shop by analyzing this one number. But things are not that simple.
APR makes no intuitive sense to most consumers, it does not cover all the costs, and does not take into account differences in a consumers’ time horizons, tax rates and opportunity costs. A more accurate way to measure the cost of a loan is to simply take a more involved look at the interest rate and the closing costs from the lender only. To compare loan offerings between lenders the consumer need not look at title costs, per diem interest, tax escrows or state/county recording and transfer taxes. None of these aforementioned costs is dictated by the lender or is part of the loan itself.
Let’s take an example on a mortgage loan for a property in Washington, DC. Read the rest of this entry »
Are you puzzled why Conventional mortgage rates vary so much, day to day and from bank to bank? Or do you wonder why advertised rates are different when you call a mortgage lender? Many times rates are not all that different, they are just very complicated for a bank or mortgage broker to accurately publish due to numerous variables.
Most people are not aware that Fannie Mae and Freddie Mac have a whole chart of pricing “add-ons”. Add-ons are an amount (expressed in points or rates) that are added on to the “base rate” in certain situations. Some examples of add-ons are for:
condos
investment properties
multi-family properties (a 2 unit, for example)
credit score
extended lock-ins beyond the standard 30-60 days
loan-to-value Read the rest of this entry »