When it comes to mortgage rates, the best rate wins - or does it?
If you are looking to get the "best rate" you need to remember that there are considerations outside of rate - AND EVEN OUTSIDE OF THE LOAN YOU ARE DOING TODAY - which could impact your situation and the amount of interest you pay. Let's look at an example:
1) Bank A has the BEST RATE available at 5.00%. They are great at customer service, and get you the deal you want. It was easy and you now have a nice low payment for 30 years. You didn't know the person who originated the loan, but they seemed okay based on the limited interaction you did have. According to all the information you know, you got the best deal for your situation.
2) Bank B has close to the best rate available at 5.125%. They provide good customer service and can get close to the deal you want. The monthly payment might be higher by $10 or $15 dollars a month - however, with this bank you learn that you can pay bi-weekly and actually turn your 30 year loan into a 23 year loan saving over $100,000 in interest payments. The individual from Bank B gets paid slightly more due to the higher rate - but he spends more time with each client learning how they can be helped (more than just a rate) and closes less deals each month.
So if you went with the best rate, did you get the best deal?
The key to any financial transaction is that you get a GREAT DEAL/RATE/PAYMENT - not just on the transaction today - but also over the course of your life. The "lowest rate available" may end up costing you more than you can imagine.
It is not easy, but you should think about the road ahead and less about your next step....after all, your next step may be in the wrong direction.
11/02/2009
Set up your Bank Statements for a Purchase Mortgage
If you are a first time home buyer, or looking to make a move and will need to use funds from your bank account, here is a helpful hint which will save you a huge amount of time and frustration (but they involve planning on your part):
If you make a large deposit make sure your mortgage lender knows where the funds came from. You will need to write an explanation letter in addition to at least one of the following:
- If the funds are from your retirement account or other account that you own, you will need to provide that accounts statement. Note, if this is a trust account you will need to show the trust docs so they know who needs to give permission for this.
- If they are gift funds, you will need to get a letter from the person who gave you the gift which will need to be signed by you and the person who gave you the gift. Also, you will need to show their account statement with the funds coming out
- If it was a loan from someone, you will need to provide the terms and then the monthly payment will need to be factored into your Debt Ratio.
If you make a large deposit make sure your mortgage lender knows where the funds came from. You will need to write an explanation letter in addition to at least one of the following:
- If the funds are from your retirement account or other account that you own, you will need to provide that accounts statement. Note, if this is a trust account you will need to show the trust docs so they know who needs to give permission for this.
- If they are gift funds, you will need to get a letter from the person who gave you the gift which will need to be signed by you and the person who gave you the gift. Also, you will need to show their account statement with the funds coming out
- If it was a loan from someone, you will need to provide the terms and then the monthly payment will need to be factored into your Debt Ratio.
11/01/2009
Set yourself up for a great mortgage rate
As a mortgage originator one of the best ways I can help a prospective homeowner is to set expectations about process, rate and program guidelines well in advance. (The following information will also be true for those looking to refinance).
Be ready to ACT not RE-ACT. This, by the way, is also a great way to plan in life in my opinion.
In the mortgage business this means that you, as a borrower, should have your necessary documents "on hand" and all supporting documentation available if requested. For example: If your bank statement shows a $10,000 deposit that is unlike any other event on your bank statement, you will need to be ready to explain the deposit and also provide where the funds came from and SHOW where the funds came from.
Perhaps most importantly, you want to be sure you don't miss out on a great rate. In order to get the best rate you need to allow for the market fluctuations to lead you there. Rates can change weekly/daily and it is not uncommon for rates to vary up to a 0.25% in a given day. When working with your mortgage lender or broker, be sure you are clear on what is "good" and what is "great" when it comes to your rate expectations. Allow them to lock when needed and be ready to close quick (in some cases the rate lock can be 15 days or less so will need to hustle).
Happy house hunting everyone and be sure to plan ahead!
Be ready to ACT not RE-ACT. This, by the way, is also a great way to plan in life in my opinion.
In the mortgage business this means that you, as a borrower, should have your necessary documents "on hand" and all supporting documentation available if requested. For example: If your bank statement shows a $10,000 deposit that is unlike any other event on your bank statement, you will need to be ready to explain the deposit and also provide where the funds came from and SHOW where the funds came from.
Perhaps most importantly, you want to be sure you don't miss out on a great rate. In order to get the best rate you need to allow for the market fluctuations to lead you there. Rates can change weekly/daily and it is not uncommon for rates to vary up to a 0.25% in a given day. When working with your mortgage lender or broker, be sure you are clear on what is "good" and what is "great" when it comes to your rate expectations. Allow them to lock when needed and be ready to close quick (in some cases the rate lock can be 15 days or less so will need to hustle).
Happy house hunting everyone and be sure to plan ahead!
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