If you are looking at mortgage loans you need to shop your rate. I know you have heard that a million times before but I have to say that if you do not shop your rate in this market odds are you are leaving money on the table… a lot of money. There is a huge variance in the mortgage market when it comes to mortgage rates at the current moment. I am seeing HUGE differences in rate across every loan type based solely on which lender you are speaking to. Same borrower, same loan, HUGE rate differences based only on what lender you are speaking to. I repeated this because it is serious. Variances from .25% on a conventional loan to as much as 1% on a government loan. I have never seen this level of disparity before, it is unprecedented and there are a few market conditions which have led to this:
- Refinance volumes dropped off a cliff: mortgage companies that were largely refinance based are bleeding and trying wherever they can to stay afloat. That means higher margins which = higher rates for the consumer
- Mortgage originators who were refinance based are now having to recreate themselves. This is leading to two things. You have lenders coming in undercutting the market to take share (YAY THIS IS GREAT for consumers!) and you have lenders trying to make up for the lack of their volume by increasing what they get paid per loan (BAD for consumers).
- Market disruption is leading to increased competition and deceptive marketing. We have new lenders popping up every day with a new pitch as to why they save you money and are better for you. GREAT! Competition is great for consumers. BUT Make sure you look past the marketing to the actual rate and fee. I have looked at a few of these that say they are saving you money since they do not have loan officers, yet I have compared rates and their rates are the same as mine and in a few cases higher. How is this saving you money? It is not. It is like self-checkout at the grocery store. Did checking out your groceries save you any money? No, but it saved the company money by making you do it yourself. Get past the marketing to the rate and the fee. It has to be both. Neither one or the other. Don’t just assume since they say they are saving you money, they are. If a guy tells you he has kittens in a van behind the parking garage, it does not mean he really has kittens. Same principal here.
- Interest rates have gone up. Lenders are playing this two different ways – you have some fattening their margins and blaming the rate increase as a market condition even though the extent of that raise is not 100% market driven and then you have other lenders fighting to gain more market share by cutting their margins to get you the lowest rate (AGAIN YAY, GREAT for consumers). You want to be working with the lender trying to get market share because that will save you money.
There is going to be a huge shake up in the mortgage market in the next two years. Lenders that think they can make 2%+ on every loan are going to go out the door. I am making it my personal mission to make sure this nonsense stops which is why I am urging you to shop your rate. Shop, shop, shop, your rate. If you are a borrower getting FHA or VA (BOTH OF WHICH ARE ACTUALLY AWESOME PRODUCTS BTW) you HAD better triple check your rate as that is where I am seeing the most outlandish differences. But seriously, even on a conventional conforming loan I am seeing as much as half a percent RATE difference ADD THAT UP OVER A THIRTY YEAR LOAN TERM! Some lenders will try to tell you that they have better customer service or can close the loan faster so of course you need to pay more. That is a sales technique. Yes, a sales technique. There are plenty of top tier lenders who can get you a great deal and give you A+ customer service and speed. You can have it all!
Now go save some money and make me proud!:)