Interest Rate ISN’T Everything
All the mortgage ads seem to scream “LOW INTEREST RATES,” but that doesn’t mean interest rates should be your first consideration when shopping for a home loan.
In fact, they shouldn’t at all.
Fees
Closing costs and rates go hand in hand. Fees can pile up on you if you’re not paying attention. Loans may have origination fees, discount points, or other fees such as underwriting, processing, etc. If you put your focus only on the interest rate, you may miss all the fees listed on the loan document. Depending on a person’s situation and how long they plan to be in the home, it may make more sense to have a higher rate and lower fees, or vice-versa.
Rate Range
Banks and other lenders don’t have a lot of leeway on interest rates. In fact, most of the money used to fund mortgages in the US comes from the same place — Wall Street. A lender may quote you one interest rate for a certain type of loan, but those rates change on a daily basis unless you are ready to lock in your rate. So keep that in mind when looking at a bunch of online quotes on different days — they may not tell you the whole story at all.
Lender Credits
Probably the most important thing to know is that different rates and different mortgage products actually cost different amounts. In other words, banks charge you a fee to get a lower interest rate on a loan. Conversely, if you agree to a higher rate, they will give you lender credit to help pay your closing costs. They may give you more credits the higher the rate you agree to.
How Soon Will You Move?
It is not a given that a low interest rate will cost you the least amount of money over the time you hold the loan. Now, if you do hold that same loan for 30 years, the low rate may be the best. But most people outgrow their first home in just a few years, and size up. And usually that five or six years is not enough time to make up for what you paid to get a lower-rate loan.
Lenders Differ
So I would say that choosing the right lender for you should be your first consideration when loan shopping. Some mortgage companies make a niche business out of working with the self-employed, for example. Some have lots of experience in getting veterans into homes. Some lenders can offer products that are not available to other lenders. And others may only suggest a loan program that is easiest for them to process so they can move on to the next client.
You really want a reputable lender who knows your local area, who can explain all of your options to you in a clear way, and who can get you into the loan that is just right for your circumstances. Check their reviews or ask your local realtor. Your realtor should should be familiar with a lender’s reputation. Is the lender known for closing on time and honoring the numbers they presented to their clients upfront? No one intends to have an agonizing loan process or a disastrous loan closing, yet it occurs all too often. This should be a fun experience!
That needs to be your priority over interest rates.
We’re happy to do that for you. You can get in touch with us on benchenault.com, through social media, or the old-fashioned way: pick up the phone and give us a call at (205) 986–4220.
Looking forward to hearing from you!
Ben Chenault,
Certified Mortgage Planner
NMLS# 130305
MortgageBanc / Fairway Nmls# 2289
Copyright©2019 Fairway Independent Mortgage Corporation doing business as MortgageBanc. NMLS#2289.4750 S. Biltmore Lane, Madison, WI 53718, 1–866–912–4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Business Oversight under the California Finance Lenders Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License. Georgia Residential Mortgage Licensee #21158. Licensed Nevada Mortgage Lender.
