Who To Believe While Shopping Your Loan

I was reading a blog on Money Magazine today about the best way to find a home loan. You can see that edition at this link (Money Magazine)
Sarah Max explained,
"When the easy money was flowing, you could get a great deal on a mortgage from just about anyone. But in today's credit-challenged world, all the avenues for finding a mortgage come with their own set of problems."

This is simple and a great intro to where we are at now in the industry. She went on to explain how the many banks have become very tough and tightened their standards and so forth. You see, brokers really have no direct relation with the money they loan, and that many times leads to a situation where more brokers than bankers would be willing to loan and "push" a loan that a banker or bank my turn down. Sarah makes mention of this in her message.

This is where I start to wonder, "is the helper trying to help the shopper in this case, speaking of Sarah with Money Magazine writing an article targeting the needed help of mortgage shoppers, or is she helping advertise the mortgage lead generating giants in our industry that typically support the broker and banker portions that established business by pushy sales rather than honestly earning referrals. Let me be clear though...I am not saying all bankers or brokers that purchase leads are not to be trusted, but I would place a bet on it that if you did the research you'd find there are more less qualified Loan Officers working primarily on purchasing leads rather than the Loan Officer who has made relationships through honesty and hard work. "Bonds between people keep one honest. If you don't have a bond with someone, you have nothing to lose"...for being dishonest that is.

Now this is where Sarah crosses me a little on whether she's helping the shopper or the major lead company. Sarah says,
"And while online lending sites hold the promise of one-stop shopping, some have developed a reputation for playing bait-and-switch on rates and not fully disclosing fees. All this adds up to a major shopping hassle. If you want to get the best rate, you'll need to tap at least two of the sources below. Scour the Web. Shopping for a mortgage online has come a long way from the days of one-size-fits-all rate listings. At some sites, including Bankrate.com, MortgageMarvel.com, and Zillow.com, you can now shop anonymously and get accurate rates. Keep in mind that all these sites act as referral services, so eventually you'll have to close the deal with a bank or mortgage broker."

The aforementioned lending website companies as I may bring attention to are lead generating companies. Sarah even mentions that you will shop their rates and fees and eventually be dumped onto a banker or broker. There is very little accountability between the bankrate.com type company and the lead purchaser loan officer for the receiver of the lead to be, should I say, less than straight forward or not slippery. That being said, Sarah is suggesting to avoid the "bait and switchers" and mentions it nearly just like that, yet she suggests to her readers to check with these lead generating sites that sell their leads to entities with more probable numbers of bait and switch type loan officers. THAT is why I wonder if maybe a blog such as this is contradicting...efforts to educate and help mortgage shoppers crossed with the demand for advertising and keeping relationships with the people who probably advertise with them, creates a less than conducive atmosphere sometimes.

Here is what I suggest. Those large "engines" such as the aforementioned bankrate.com's and so forth are large enough that they know they have to be on target when advertising and therefore will list their rates and fees pretty accurate to current competitive market costs...lending laws watch them closer than the small guys and therefore they are held more accountable many times. Now since it is obvious that today's market isn't forgiving to the person who prioritizes the "cheapest" loan, but first prioritizes the evaluation of trusting the loan officer with the most competitive rate, use the big "engines" to gauge what is competitive and then shop different lenders by your personal character "radar". If you feel rushed or feel like you are being pushed at all, trust in the old adage, "if it's a good deal, it don't have to be committed on today". Be sure YOU the buyer/shopper define committed right. Committed should mean to you in the mortgage industry, I've spent money. A lender may say, "sir, I realize you are shopping and I feel like rates will be higher tomorrow. Do you mind if I lock your loan?" As long as they don't require upfront non-refundable money if you don't use them, and you intend on using them if it works out, let them lock it for you.
Best of luck in your home shopping!

How is the GDP/Gross Domestic Product outcome going to affect mortgage rates?

The news had the reports front and center about the recent GDP/Gross Domestic Product outcome, and many I'm sure are wondering, "how will this change the mortgage rate market in the short term?"
Here's the skinny on it.
Economists expected the growth to fall by 5.4 percent, but it only fell by 3.8 percent. Talking to my mentor and partner in business, he said it just right when trying to express this in layman's terms. He said,

"imagine that economists expected a 'category 5 hurricane, but we got a category 3'".

What it means is, the fall in growth still means we are not making our way back into the thriving economy yet, but the good news is that we are not as bad off as we thought. Unfortunately, since we fell less than the economist projected, it didn't maximize the amount of positive affect we could have had on lowering interest rates.
Define GDP/Gross Domestic Product- this measures consumption and spending inside the United States

How to find the best interest rate for your refinance watching the market?

At this point, making judgment to forecast what the market will deliver in reference to the best time to lock your interest rate has been a coin flip. This week and last week haven't necessarily followed the rules of the "game", so to speak. As economic reports continue to come out in the refinance seekers favor, the Stocks have taken their hits, but the bonds haven't executed to the extent that we needed them to for rates to drop.

On the other hand, rates have held tight and stayed flat overall in the past week and we haven't lost much ground. Getting that super low sub 5% rate in the 4.25%-4.5% range isn't out of the question. The experts at www.Moving.com are still releasing the knowledge about upcoming economic reports that can give us all hope that rates may still lower. Here is the commentary from Moving.com that may service our needs for lower rates.

Three economic reports, and we hope they all work in our favor. Moving.com said, "There are three relevant reports on the agenda for tomorrow. The first is December's Consumer Price Index (CPI). This is also one of the most important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy...Weaker than expected readings should lead to bond improvements and lower mortgage rates tomorrow since this is the most important of the three." This could mean that tomorrow rates open up nicely for us if the reports work in our favor, or at least by the end of the day tomorrow.

"December's Industrial Production report is the second report to be posted tomorrow. It will be released at 9:15 AM ET and measures output at U.S. factories, mines and utilities." When the stock market sees the reports at 9:15am, that should be enough time to rally the selling of stocks and buying of bonds in time to give the banks what they need to confidently make their decisions on our hopeful lower rates...assuming the reports work in that direction.

"The final report of the week is January's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates." This is the final report for tomorrow and cross your fingers.

If all reports do what we want them to, and rates fall, I'll Blog about it and let you know what the outcome is. If there is not good news, I'll say now, have a great weekend and better luck next week.

Prime Rate vs 30 Year Mortgage...Charted For Easy Tracking

As a mortgage consultant, we try to answer that ever expected question when the Fed moves prime, "...so, how is my rate affected by the rate change in prime?", but don't always have right on hand a chart. [Please see previous post at LINK for additional details regarding this subject].

When buying Real Estate, it would be easy to conclude from the information below, although the 30 year fixed rate will also drop after the Fed drops Prime, it would be rare that you had the time to wait if you are already in a contract and Prime was dropped. The 30 year rate takes a little a while to react after Prime has been changed. In the same fashion, Prime is increased and you are under contract, you can probably stand to still float a lock for 15-30 days w/out too much concern in losing ground on your rate.

Below is a chart of the past 30 + years tracking the Prime Rate and the 30 year fixed mortgage. In case it doesn't show up too clear, the blue is Prime and the orange is the 30 year mortgage. It is tracked on September of every year starting in 1971 and ending at Sept 2008.

By saving this chart on your desktop or My Documents, you can forward this chart along with your version of the explanation when they ask, "what's up with my rate now since Fed changed Prime"?


Best of luck in your home buying goals!