September 30th, 2009 10:43 AM by Preston Ware
Surfing for a Mortgage in Today's Market
Freddie Mac this week released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.6 point for the week ending September 24, 2009, unchanged from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.09 percent.
When customers surf for a low mortgage interest rate most of them do not understand that when they are quoting a monthly average like the Freddie Mac average, the number we get usually assumes about .6 tenths of an origination fee. Call it broker fee, origination fee or discount points, they all mean the same thing when it comes to the bottom line for the mortgage person. These fees along with application fee and processing fees are acceptable ways of charging the customer directly for the loan in an effort to keep the interest rate as low as possible. (Be careful if you intend to deduct the “points” you pay on your taxes because I believe “origination fee” is the only one that falls under the category of an acceptable deduction.)
So if you calling up mortgage guy Joe on the internet make sure you are comparing apples to apples. If you are comparing Freddie Macs 30 year fixed average rate, ask mortgage guy Joe to quote you a loan with .6 of 1% origination fee and his typical application fee and or processing fee. It’s unfair to mortgage guy Joe if you call him up and ask for a “no points” loan when you are comparing it to the national average of mortgage interest rates which includes .6 of 1% origination fee.
Increasingly customers are moving to the internet to shop for the lowest mortgage interest rate. They get hooked by an advertisement like “Fixed rate 4.25%” but don’t get a chance to read the fine print because there is no room for it on Google. Surfing for a mortgage understandably makes sense with the price of gas and our busy schedules. We don’t have time to coordinate a meeting with Bob at ABC Mortgage on the corner. The other part of it is that the educated consumer can move on to the next guy a lot easier. If you go sit in Bob’s office for an hour and drink his coffee, admire a picture of his kids and chat with his secretary, you will have a hard time telling him you found a better deal.
The problem with surfing for a mortgage by email is that customers don’t know what they don’t know. Quite often when I am doing the dance with a potential client and they insist on trading emails about the various facets of their loan, I beg them to pick up the phone and have a conversation. They may think they are asking all of the pertinent questions by email but they are not the loan officer. Most times, they are not aware of potential pitfalls and cannot look deep into the file. It is important to have a thorough discussion about each aspect of your loan. Loan program, appraised value, realtor, assets, credit, income, timeline, different lenders, trends in rates, lock time frames, escrow or no escrow, how much to escrow, coordinating the closing, post closing, etc. We will get the loan done right, have a nice conversation, skip the caffeine and still talk about the kids.
Written by Preston WareFirst South MortgageTel: 704-542-8057* http://www.prestonware.comEmail is firstname.lastname@example.org.