SHOPPING AROUND?

HERE’S THE INSIDE SCOOP ON HOW TO DO IT RIGHT!

First: make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are FIVE SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS…RUN…DON’T WALK… RUN…TO A BROKER THAT DOES!

1) On what are mortgage interest rates based? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT trust a lender who has their eyes on the wrong indicators to know when the trigger should be pulled on your rate lock.  Because mortgage bonds are traded on the open market like stocks are, they can be very volatile.  Sometimes the windows of opportunity do not last long.  Make sure that your broker is focused on the right target.  Watching the 10-year Note to gauge mortgage rates, is like watching Yahoo stock to monitor where Google stock is trading.  They are completely different!  Knowing when to lock is a job for a professional, make sure that you are dealing with one.)

2) What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have this at their fingertips. Inflation is the only thing that can erode the value of mortgage bonds, and thus move interest rates higher.  Make sure that your mortgage broker is familiar with these indicators and when they fall on the calendar.  Some of the pieces of data that have the highest impact on rates are as follows- Core Personal Consumer Expenditures, Core Consumer Price Index, Jobless Claims and Retail Sales.  If you want more information on any of these indicators, please call a mortgage planner at Friendly Mortgage.)

3) When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, please call one of our mortgage planners.)

4) Do you have access to live, real time, mortgage bond quotes? (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!)

5) Are you coming to my closing? (If it's not important enough for them to take time out of their busy schedule to attend your closing, how important is it that everything gets done correctly?  My theory is that any product that is hand-delivered to the consumer is done as well as humanly possible.  If it is shipped in a package with no one present to answer any of the important questions, how accurate will it be?  Will the rate be the rate that was promised?  Will the terms be what was promised?  Will the money be wired on time or will everyone be waiting to see if the deal will happen?)

The questions above are a great way to shop for a mortage broker.  Once you have found your broker, let them shop for the best rate.  With the right answers, you will feel confident that you can trust them with such a large decision.  Best of luck!