Don Davis Ph:360-652-9994 email:dond@htlnw.com
I know it’s been a while since I last posted and for that I am sorry. I will endeavor to be more consistent in the future.
I have been working on a lot of different things lately as well as getting great financing for great people. I will share some of those stories in the near future. However, this brings me to what prompted me to write this post.
In this environment, while everyone expected rates to increase once the FEDs stopped buying mortgage backed securities, rates have decreased. Last week it was possible to lock your rate (on a purchase that would only be possible if you were under contract) for under 5%. Yes that would mean that there would have been a 4 as the first number and point something something. That would be for a 30 year fixed rate mortgage. Unbelievably there were ads on radio and on the internet for rates under 4%! In fact there were several in the 3% range, stating that they were fixed rate loans. Today as I write this rates are bouncing in the upper 4% to lower 5% range and that is the note rate NOT the APR which is always going to be higher because it takes into account the fees associated with your loan. In the mortgage business if you are quoted an interest rate you also must be given the APR as well or whoever quoted the rate is in violation of a very basic FTC rule. I also feel that the disclaimers at the end of every ad should be spoken or written in plain English and very visible (now I’m dreaming).
I did look and saw that I could do a fixed rate loan in the 3% range. It would be fixed for the first three years and then subject to adjustment for the remaining 27 years. I could also show discount points (buy down the rate) and you could lower your rate that way as well. All you would be doing is pre-paying the interest up front. That is why disclosing the APR is critical, because the more you spend up front the higher the APR would be. To take a 5% rate and buy it down to 4.5% on a $250,000 loan would cost approx $12,000 up front PLUS the normal closing costs. And all you did was pay the interest up front instead of over 30 years.
Those of you who have done business with me through the years never came to me because I advertised low rates. I will work to get you a fair and competitive rate but even if I had quoted you a rate it almost would never be the rate you would end up with. That would not make for a very good business relationship.
I could spend hours writing about this topic and how it all works. What I can do is suggest you find a trustworthy loan officer that speaks in plain English and explains how the process works and all the documentation involved. Also I hope that they explain how rates are determined and demonstrate the ability to get you a competitive rate.
If you ever feel uncomfortable or feel misled, don’t walk but run and find some one you trust!
you might find this interesting as it is written by one of our industries continuing education leaders. http://mortgagefiduciaries.com/2009/05/paramount-equity-consent-order/
