By far, the most common question I receive and the question that frustrates me more than anything. Why is that? Because “interest rate” may NOT be the most important question you should be asking. I love the “rate shoppers” as well who get referred to me by previous clients or referral partners and all they want to hear is a rate lower than their previous phone call. It’s like a challenge and they feel a sense of pride if they finally get the guy on the phone that tells him/her the rate they want to hear or the [below market] rate they heard on the radio. Unfortunately there’s a direct correlation between how much you’re going to pay in closing costs and the rate you ultimately choose. That’s right… YOU HAVE A CHOICE!
You’re not buying a car where you can have the exact same one at three different dealerships and the only thing left to negotiate is the sales price. Buying a home or even refinancing your existing mortgage is a complicated process and you really could [and should] base your decision on one simple word: TRUST.
I had a couple recently who almost switched lenders in the middle of the Application process because they were offered a lower rate. Sounded great to them! Why would my friends at Gateway Mortgage not offer me this great rate that a complete stranger at a competing bank was willing to offer? In reality the bank wanted to charge them $5500 more to save $17 /month. Does that make sense to anyone? Of course not, but the average consumer asks all the wrong questions and only hears the answers they want to hear.
- “What are your rates?” – WRONG
- “How much money will I have to bring to the closing table?” – WRONG
- “What will my monthly payment be?” – WRONG
Yes, everyone has heard of APR (Annual Percentage Rate), but how many of you can really explain what that even means? So to simplify things and to feel like you’ve done your due diligence you simply ask: “What is your rate?” To the unscrupulous Loan Officer, you never had a chance.
I personally have been a Mortgage Broker for over 23 years and my Team has over 100 years of combined experience in the mortgage business. During that time we’ve seen too many changes to mention with the majority of those changes negatively affecting the consumer. Things like increased closing costs, a difficult third-party appraisal process, stricter underwriting guidelines and an overall longer timeline have left a bad taste in almost everyone’s mouth. (Including mine)
But there was a major positive that came from all the reform in the mortgage business, at least if you work with a Mortgage Broker. And that positive is compete transparency. 100% of my fee as Mortgage Broker now comes directly from the lender that we ultimately sell your loan to. Not only that, but I show you upfront EXACTLY what I’m going to be paid. (Name another industry that does that!)
What does that mean? As a Mortgage Broker you don’t pay me a penny and I don’t make a penny more whether you choose a rate at 3%, 4% or 5% (or anywhere in between). My fee is basically “fixed.” So when I’m offering advice I’m truly offering advice that can in no way benefit me financially. I take pride in getting to know my clients and finding the right interest rate for them, even if that rate is higher than what you heard on the radio. Even if the payment that I offer is higher than you were told elsewhere. Like I said: The right deal may or may not be the lowest rate!
I’m not going to turn this into an “Anti Mortgage Banker” message and I know some very capable and honest Mortgage Bankers in the area, but for the most part a Mortgage Bankers’ compensation still may be based on the rate you ultimately receive. Not to mention, you have no idea how much that Mortgage Banker is making off your loan. They can make money in multiple ways as opposed to the straight-forward and honest approach of a Mortgage Broker. Why play games? Why not just be honest?
Bottom line: Knowledge is power so find someone you can trust. I love being a Mortgage Broker because I can look a client in the eye and tell them exactly what I’m being paid for the services that I provide. If I have nothing to gain financially, isn’t it easier to feel like you’re getting the right deal? I think so. Now that I’ve explained a couple things, maybe the mortgage industry isn’t that complicated after all?