Hey guys. I have a question…
Why do some mortgage companies offer lower rates then others? Is it the lenders that they work with that are offering these lower rates, and some brokers don’t have access to the ones with the lowest rates, or do all those rates you see on advertisements come with a bunch of stipulations and eligibility requirements that most folks can’t meet?
Hey guys. I have a question…
Here is about all I can tell ya:
Fannie Mae buys most of the loans that are Qualifying and their rate is pretty much the same. The different brokers will add points etc t o get paid for their services. Where the rates really start varying is when non conforming lenders get involved at then with different programs and credit scores. Programs include investor loans and the different documents required and the loan to value. The higher the LTV and the less documents the higher the rate. Some brokers also add on small % to the rate and get an extra up front fee (points) for this and this also adds to the rate differences. It does pay to shop around especially with non conforming and hard money loans. LOL
Ted said that really well. Most companies should be equal in the conforming section and only very by the closing costs or points paid.
Some lenders will offer 5.875 right now on a 30 yr fixed mortgage but when you get there the paperwork has 2 points added to the loan. And that means that they had to charge you points to make up for the deficiency in rate. Normal 30 yr fixed rate until yesterday was 6.25% with no points and about 1200 in clsoing costs. so on a 100k loan at 5.875 would have $3200 in closing costs. And that does not include escrows and pre paid interest. Then you will find the some brokers that charge you 6.375 and add the 2 points anyway! hmmm
So the reality is as Ted said, we all sell our loans to Fannie Mae and we get the same base rates.
And some lenders… DITECH…ELOAN…like to quote “buy-downs” and “negative amortization” rates. They don’t tell you in the ads that that your are buying the lower rate or that they may be bleeding the equity out of your property.
Negative amortization has always been a naughty word in my book and I do not like buydowns either. If the buyer can not afford the payment they should buy a cheaper house. Also the seller is usually asked to pitch in and help with the up front costs. I guess sometimes it may be a necessary evil but know what you are getting into.
I don’t like them either. It burns my butt when I see the commercials saying “NO CLOSING COSTS” and “$275,000 mortgage for only $900 a month.” They make brokers look bad, but at the same time they are slinging some of the worst products (for the consumer) on the market.
Great info! Thanks. I asked the Broker that I am currently working with now this same questions, and he was very forthcoming with the same answers that you all posted.
(SLowly but surely, it’s all making more sense…) 8)
Don’t believe what you see advertised or in a lot of cases, what someone tells you over the phone unless they are a trusted or referred source. The only thing that is for sure is what you sign at the closing table.
Ok. Thanks. I will keep a heads up on that.
what do you guys think of countrywide home loans?
Just to add a few extra comments to what has already been explained.
Mortgage Brokerage firms borrow funds from lending sources at Wholesale rates. That same lender (say your local big bank) lends their funds at a retail rate. In most cases, the morgage broker can beat your own bank in the interest rate your offered, simply due to this spread (wholesale vs retail).
Also, just as Walmart is so large and gets better “Wholesale prices”, large volume brokerage firms many times get different levels of “premium pricing”. This can be passed on to the borrower so as to make the rate a better deal, or it can be kept as additional profit to the broker/firm.
As has been stated, the big differences in interest rates is in the subprime market because for the most part the conforming market is just so competetive you are not usually going to find large differences. (But that does not mean you should not at least shop around some to get an idea.
Just remember that in the lending game, Money is a “Commodity”.
As with virtually all commodities, there is the base product and then there can be a premium earned on what you do with or how you repackage it…