BORROWERS ARE ARGUING OVER THE WRONG THING
If you’re around home sales and mortgages for any length of time, you understand how borrowers get very excited over an eighth of point in rate.
Before securitization, there could be a pretty wide difference in rates, and it made sense to shop around. Mortgage rates were a lender-specific phenomenon, and rates could vary pretty noticeably from lender to lender.
Now, there’s pretty much a standard rate that’s determined by FNMA and by the mortgage backed securities market, and the differences between lenders are pretty small.
Still, borrowers will shop.
The internet has, of course, played a big role in this. A borrower can spend a few minutes at a computer and get rates from 20-30 or more lenders. The rates won’t vary a huge amount, but it can be very seductive.
If we do the math, though, borrowers are focusing on the wrong thing. The monthly savings by saving an eighth in rate just don’t amount to much.
Let’s look at a 30 year fixed rate loan for $300,000. At 4-1/8% the monthly payments will be $1,432. Now let’s assume the borrower shops all over town, spends hours on the internet, and he finds a lender at 4.0%. Guess what, his payment drops by only $21! That’s $252 a year, and even if the borrower stays in the house for eight years, it’s barely $2,000.
It just isn’t all that much and in today’s world where the wrong lender can mean no closing.
Wouldn’t buyers be better off negotiating a lower price of $3,000? Or a $4,000 credit towards termite repair.
When a Realtor recommends a lender, it’s because he or she knows that lender to be dependable. And closing on time can be a lot more important than saving an eighth of a point in fees.
Rates matter.
But it’s more important for borrowers to have a good Realtor to negotiate the best possible deal.
Make it a great day,
Sean K. La Rue
Senior Vice President – Franklin Loan Center
“Your KEY to Moving Home!” – Yo hablo Español
Jumbo Loan Expert | FHA/VA Direct Lender | Reverse Mortgage Advisor
44800 Village Court – Palm Desert, CA 92260
Mobile: 760.835.5663 Office: 760.837.1488 FAX: 800.784.9089
DRE# 01786480 NMLS# 291852
Jan Christensen
Executive Assistant | 760.837.1486 | jchristensen@franklinlc.com
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