As a soon to be homeowner, the question you most want answered is, “what will my rate be?” Most likely, your friends, siblings, coworkers, and even your hairdresser have told you their rates, and in doing so have practically dared you to try to get a better rate. The problem with being consumed with the rate, though, is that it’s really not as important as some other things, such as finding the right mortgage program, or the right person to work with. That’s right, finding the best rate should not be your end goal. Your primary goal should be finding the right person to work with. Let me tell you why.
Sure, you might see ABC mortgage down the street advertise a lower rate. You meet with them and they say you are going to get a good rate, but once the paperwork is completed, they end up switching you to a program that might not have as good a rate. They get you in the door by advertising a good rate, but it’s likely a program for only the most qualified buyers, so you end up with a higher rate than advertised. Or they might not ever answer your phone calls or emails. How important does the rate feel when you can’t get a hold of the person responsible for one of the biggest purchases of your life? This happens more than people realize. Companies like this get buyers in the door, but the don’t really get the guidelines, or they don’t do the pre-qualification right. They don’t ask the right questions, and end up putting buyers in the wrong mortgage program, or even worse, they end up telling a couple, “Sorry, we can’t do the deal.”
Legally, companies are not supposed to advertise rates just to get people in the door, but I see it all the time. They offer these great rates that are available if you want to pay X amount of points, X amount of dollars, you have perfect credit, and you’re putting 50% down. It’s like those great deals on cars that you see in the paper, but when you get there they say they only had one car and it’s already gone, but we have these others. They’re teaser rates; they get you in the door.
I actually hear it from Realtors on my show all the time. They say they’ll get three or four weeks into the process and find out the deal is dead because the buyers couldn’t get a mortgage. The mortgage broker that asks the right questions upfront can save a lot of time and disappointment for the buyers, and the Realtors. I have some lenders that do certain programs, and other lenders that won’t, but they’ll take other types of loans. It’s just a matter of making sure you’re working with the right person. In the end, a good mortgage person is going to get the best rate that is available for you, in the best program for you.
Most people want to know what their rate is going to be because they are concerned about their monthly payments. What they don’t realize is that their property taxes can affect the monthly payment even more than the rate. For instance, if you get a rate that is lower by 1/8th point, it will only change your monthly payment about $20 per month. But if you can find a home with $3,000-$4,000 less property taxes, this can save you $300-$400 per month. If you want a lower monthly payment, it’s more advantageous to look at the property taxes rather than the rate. If your budget is really tight, you want to find a house in an area that has lower property taxes. It’s difficult in New Jersey, but it’s all relative.
Remember, many financial institutions advertise their best possible rate just to get you in the door. Often, this rate is tied to a mortgage program with specific qualifying guidelines, which are difficult for the average borrower to meet. Or, the best rate is for, let’s say, an FHA mortgage, but a conventional mortgage program is better for you. If it’s not the right program, then the low rate doesn’t really matter. In the end, we all have the same rates. What is more important is working with someone who can find the best program for you.
Call me for help finding the right program for you!
Bob the Broker