You Better Think
This week’s music inspiration comes from Aretha Franklin’s 1968 hit “Think.” What I am referring to is that many “mortgage shoppers” do not really think about what they are doing when they are shopping for a mortgage. Let’s face it… buying a house and getting a mortgage is probably the largest purchase/investment that they have made in their life. But when they “shop” for a lender, they are not asking the right questions or doing a deeper dive into who they are going to place their mortgage request with.
The mortgage industry, like any other industry, is filled with some very good loan officers and companies, and then again… some that are more “salesmen” than “educators.” Part of this difference is due to the inexperience of some loan officers. The web can get you pretty much anything you ever wanted to know about the potential loan officer with whom you may place your loan request. For instance, how long have they been in the business, what do their “Google” reviews look like, what is their educational background, and many other things you may find out about them. Unfortunately, the bar to enter this industry is not exactly set very high. So, doing a little research about the person who you are entrusting with arguably the largest purchase/investment in your life is probably worth it.
Asking the right questions and knowing what is negotiable and what is not are both very important. There is no magic pot of gold out there. Monies for mortgages, for the most part, all come from the same place, so there should not be vast differences in rate quotes. Rates are determined by what FNMA/FHLMC as well as FHA/VA rates are being offered for on the open market and then what each company wants to make on a loan… also known as their margin. Margins differ from company to company and bank to bank but are not grossly different. So, when you see that the national average for 30-year fixed-rate mortgages is 7.03% and someone is offering 6.50%, this is where a red flag should come up. Why would someone be at 6.50% when the national average is near 7%?
In most cases, the difference is in the cost to you in the form of points. More points equal lower rates. Higher overall cost could also give you a lower rate but at a cost. In many cases, a full discount point may get you a .375% or more lower overall rate, but it might take you 18-24 months to break even on that cost, and if you refinance inside that time frame, you might have been better off with the higher rate, from a cash flow perspective.
The other thing to compare is the 800 sections of the cost estimate. These are the only fees that the lender can control. Beware of lower fees, when comparing lenders, in any other area of the cost estimate, as these fees are determined by the attorneys, title companies, the State of Georgia, the County you are buying in, taxes and insurance escrows and any HOA fees. The bottom line is the lender you choose has no control over those fees, and they will be exactly the same regardless of the lender you choose when you close. But I promise you that you will see different estimates with varying costs in these fees not included in the 800 section from one lender to another. Property taxes on a resale can be found quite easily but are often misquoted. Homeowners insurance is a little more difficult to estimate, but quotes should not be grossly different. These numbers are important not only for your cash to close, as they will make a difference in your escrow account estimate, but also for your “real” payment. Some loan officers will give low estimates on these to make their payment look better than it really is. Again, the lender does not determine these things, they are what they are as verified by the closing attorney in Georgia.
What I have shown you is that the only thing to really shop for when looking for a mortgage is the reputation of the actual loan officer, the reputation of their company, their rate, and their section 800 cost on the Loan Estimate. I am not saying that the lowest combination of these things should win every time. However, I am saying that the bigger picture of reputation and these costs are what you should focus on. Remember, don’t be sold, be educated by your lender. THINK!!!
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value to you.
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Blog post date: Thursday, February 20, 2025
