Are you mortgage rate shopping in Florida?

STOP SHOPPING AND READ THIS FIRST!

Generally, the first question a client asks me as a loan officer and mortgage company owner in Florida is “What is your rate today?” My answer is always “Whatever you want it to be!” I usually get a funny look before they ask me if I’m kidding. I answer “No! Make it anything you want, since I know absolutely nothing about you or your situation, so your guess would be as good as mine!”

When you go to the doctor’s office, do you ask them what it will cost as soon as you walk in the door? Of course not! You explain your particular situation in detail, the doctor asks some questions, you provide the answers, and then he reviews your situation for anywhere from a few minutes to a few days. When he reaches a conclusion, he calls you with his findings. Only then do you find out what your particular situation calls for and what costs you will incur as a result.

It is not much different in the mortgage business, and anyone that tells you different is a fool or a liar. The mortgage with the lowest rate may not end up being the best loan for you in the long run. The lowest mortgage rate in Florida is low for a number of reasons - generally it is for a shorter period of time or for a nontraditional type of loan. Remember, what you really want is the best loan for your particular situation and a great mortgage rate. The wrong type of loan with a great rate can cost you thousands over the long term, especially if that low rate changes when you least expect it.

So, how do some of the loan officers, bankers, and mortgage brokers in Florida get you to take their offer? It’s simple, they make you a great offer (an offer that they cannot obtain - but you do not know that yet!) and then as the closing approaches, or even at the closing, something “suddenly came up”. This is called “Bait and Switch”, a common tactic in all types of sales. The loan officer will say that at the last minute rates went up, your credit scores went down, that the credit markets were unkind this week, the underwriter took another look at your loan file, or your property did not appraise out as promised. What should you do? RUN! If I promise one of my borrowers a rate and a particular type of loan, I deliver that loan with only one stipulation: you have told me the truth, the whole truth and nothing but the truth! If I find out after I have quoted you a rate that you are divorced and paying child support (you never told me that), or you took out a loan on your 401-K (you never told me that), or that you are 3 months behind in your mortgage payment (you never told me that), or that you quit your job two days before the closing; then all bets are off - I cannot deliver you the loan that I promised because you did not tell me the truth and give me all of the facts.

Another thing to remember is that, like you, I don’t work for free, and neither does any other Florida lender. Every lender earns a fee off the loans they sell. All of us have closing costs. All of us need to do an appraisal, pay our processors, underwriters and loan officers, not to mention cover all the other costs that go into the loan process (phones, paper, office space, and computers).The difference is how we show our fee and explain it to you. Some lenders have very low closing costs. They may advertise closing costs of $250.00, plus appraisal and title insurance. Some may even advertise no closing costs at all. How do they do it? Quite frankly, many lenders and brokers fail to tell you the whole truth. You can protect yourself by making sure you receive a Good Faith Estimate (GFE) and Truth in Lending Statement (TIL) from your loan officer. The law requires that these statements be sent to you within 3 days of your formal loan application. The information in these statements gives you the ability to ask questions and compare one lender to another on an even field. If you do not receive the Good Faith Estimate within the required time, DEMAND IT! If you still do not receive the GFE and TIL, find another mortgage broker! After all, it’s the law.

But remember, not everyone is going to pay the same price for a mortgage. Some mortgage companies have higher prices than others for different home mortgage loans. This means there is competition in the marketplace for your loan, so you can shop around and find the best loan with a great rate for your particular situation. Usually, there is someone always willing to give you a lower rate. Choose carefully! Ask yourself if it is the right loan for your particular circumstances.

Loan officers and Lenders charge one of three ways:

Up front fee with the lowest interest rate possible
Up front fee and back-end fee (yield spread premium) with the middle of the road rate.
Back-end fee (yield spread premium) only, highest rate.

The backend fee, or yield spread premium, is what a lender (Fannie Mae, Wall Street, Ginnie Mae, and Freddie Mac) will pay a mortgage company for delivering the loan to them. You don’t pay this fee at closing, but your base interest rate, or Par Rate, is raised to compensate the Lender for paying the mortgage company’s fee. Thus, you are paying a small increase in the base interest rate over the entire length (years) the loan is outstanding. If the par rate is 7.00% per annum on a $100,000 loan, and the mortgage company receives a 1% yield spread premium, this would equate to a fee of $1,000 to the mortgage broker. Your interest rate, however, might only go up .125%, making your actual rate 7.125%. In this case, your additional cost would be approximately $8.41 per month for a 30-year loan. You may also have the option of paying the $1,000 fee up front. Remember, there is no such thing as a free loan; otherwise no one would sell them.

You can save thousands by shopping wisely and remembering to choose the right loan for your particular circumstances. Beware of the old “Bait and Switch” - a promise today that cannot be met on the closing date! Compare, Compare, Compare! Use a lender’s GFE and TIL to compare against other lenders. Finally, do not be afraid to ask questions. If you don’t receive answers that make sense and put you at ease, find another mortgage broker. Have a great day shopping for a mortgage loan in Florida!