Cocktail Party Chatter

June 25th, 2012

There is nothing worse for a mortgage lender than the current cocktail party chatter going on about interest rates. It seems to be a main topic at the water cooler, over coffee, on Facebook, and at cocktail parties. Who got what rate, who got the lowest rate; rates, rates, rates. No talk about service or experience, and no talk about execution. It reminds me of the talks I hear about related to who has what car or what house, who took what vacation, etc. Interest rates are the current cocktail party chatter, and it is not good for me. Why?

Because people do not talk in detail, that is why. People talk in vague generalities, to be expeditious, in order to get to the next subject. When you see an old friend at a cocktail party, there might be 5-10 minutes to catch up on about a half dozen subjects, all of which likely need 10-20 minutes each to really do justice to them and talk in sufficient detail so that people really understand what is going on in your life.

Below is how people talk quickly and vaguely at cocktail parties, and then I’ll list the reality of the matter:

Boast: “I got 2.50% on my refi, my lender told me that was the lowest rate he ever got anyone.”

Reality: The cocktail party attendee forgot to say that the loan was a 15 Year Fixed Rate, for which he paid 2.5 points, which on a $400,000 loan was $10,000. The person overhearing the above boast is getting 4% with 0 points and 0 closing costs on a 30 Year Fixed Rate, on a Conforming “High Balance” loan, and thinks he is getting ripped off at 4%, not understanding there is a difference in terms, and the different loan sizes mean different rates. And loan officers always say they have never locked in anyone at a lower rate, we are in sales…remember?

Boast: “My bank did not ask for any paperwork, and did not even do an appraisal, it was great!”

Reality: The bank did ask for all the same paperwork that any lender would, the boaster just has selective memory induced by too many cocktails. And the appraisal likely did get waived, because he only owed $200,000 on an $800,000 home, and the automated underwriting system that we all use decided to waive the appraisal requirement, and any other lender would have secured the same waiver.

Boast: “I just got a 30 Year Fixed Rate at 3.50% with 0 points, and the lender offered to pay $1,000 of my closing costs. I am so handsome!”

Reality: The boaster may indeed have gotten this, and just happened to have locked in on the one day the market was at rock bottom. Rates move daily, don’t forget. And the boaster had a super high credit score, which allows for the best rates. The person overhearing all this got 3.875% with 0 points, and no lender credit towards their closing costs, and also has a high credit score. But the reality is that the boaster had an 763 credit score and was buying a single family home, and the one overhearing the boaster had a 734 credit score and was buying a condo. Condos are charged a higher rate unless you have 25% down, and you need a 740 credit score to get the best terms on a Conventional loan. And the boaster locked in on a lucky Monday that rates happened to drop, whereas the person hearing the news locked in on a Thursday when they blipped back upwards. So the boaster got a better deal for reasons they did not mention. The boaster is not handsome.

I could go on for days, but you get my point. Cocktail party chatter on interest rates is about as worthless as it is for investment advice. Ignore it, choose your lender wisely based on experience and on them being a local, direct lender. You will be treated fairly, get a good deal, and get the best service. The end.

Learn more: What is a lender credit?


Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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