We have got a lot of calls recently from customers trying to get a lower rate through the banks they pay their mortgage to, and frustration is setting in. We find that most people call their current lender first because they do not know who else to call. Then they get the idea that they deserve special treatment as a result of their established payment history, thus making the process quick and painless.
Their current lender also piles it on, implying that because they have their current mortgage, the entire process will be easy. They claim there is limited documentation and the appraisal will not be required.
But this simply is not the case. Maybe this was true back when the Big Banks kept the mortgages on their books, but now everyone sells them to Fannie Mae or Freddie Mac so we all play by the same rules.
The striking part is the gap between our rates and the big banks has never been greater. Simply put, the banks are charging higher rates simply because they can.
Eventually, there is some point in the process that expectations set by their current lender to not get met and the troubles begin.
Most people are calling us because past clients have done a wonderful job in referring and we greatly appreciate that. You will continue to hear these stories from friends and family because the rates are so low. So call us to get the truth quickly as it could take forever with your current mortgage company. We are here to help!
Posts tagged MORTGAGE INTEREST
Big Banks VS Mortgage Brokers
Cash to close
We believe that all clients need to fully understand what it takes to close on their home loan. Yet the “Cash to Close” has consistently provided confusion in all borrowers’ minds.
There are 3 main components that make out your cash to close:
(Say we have a $150,000 purchase price, putting 10% down).
- Down Payment – $15,000 (Can range from 3% to 20% down or more)
- Closing Costs – $2,500 (Usually between $2,200-$3,000)
- Prepaid Items – $4,613
- TOTAL – $22,113
Prepaid items are certainly the most confusing, and can be divided up into 4 categories:
- Escrow Account: Lender will establish an account to pay your property taxes and home owners insurance ONLY IF you put less than 20% down.
- Property Tax Pro-rations: In Southeast Michigan, property taxes are paid 1 year in advance, so you must reimburse seller for taxes already paid. *Required regardless of down payment amount
- Home Owners Insurance: 1st year policy is always paid in advance and paid 2 weeks before closing. *Required regardless of down payment amount
- Prepaid Interest: You are required to pay for the interest on the remaining days left in the month you close.
In our example, the $4,613 can be broken down into:
- Escrow – 7 months worth of property taxes and 2 months worth of home owners insurance for a total of $1,900
- Tax Pro-Rations – 6 months worth of taxes totals $1,500
- Home Insurance – Premium would be $900 per year
- Prepaid Interest – Say we close on the 15th of the month, you would have to pay the remaining 15 days worth of interest at closing, a total of $313.
Keep in mind the tax pro-rations usually are the most confusing, and some lenders will not include this as it is not a lender related amount. Hope this clears things up.
How to lock the best interest rate?
Interest rates fluctuate just like stock prices, up and down throughout the day. So we get asked constantly: “Should I lock my interest rate today???”
Know that you have two options for your mortgage application – Locking or Floating.
◊ Floating Rate – Exactly what it sounds like, you assume all market risk. If rates improve, you get the better rate. If rates increase, you suffer the consequences.
***Given that floating puts you at risk, we typically do not advise it***◊ Locking Rate – Establishes your worse case scenario and removes anxiety.
Knowing your options that are available even after you lock will help you win the “Lock vs Float” battle.
- If you lock and rates increase before closing, you WIN because your rate is below the current market rates
- If rates stay the same, you still WIN because you removed anxiety and did not waste time looking up rates everyday.
- If rates drop before your closing, guess what, you still WIN because lenders will allow you to lower your interest rate if the market drops. Lenders would rather lower your rate and keep your business rather than watch you walk away and take it somewhere else.
Moral of the story, if you have a purchase agreement signed, lock as soon as you can!
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