| On any given day my phone will ring several times | | | | monthly payment. Potential home buyers with lower |
| with buyers who simply call to ask what the current | | | | credit scores will undoubtedly be looking at higher |
| rate is. Meet the 'rate shoppers.' This is a group of | | | | interest rates than their more credit worthy |
| would be clients, most of whom are well meaning | | | | counterparts- but the problem for these buyers can |
| enough. In fact, they are probably more educated than | | | | become two fold. In addition to a higher interest rate |
| the average consumer. In some cases however, they | | | | they may also face a higher monthly mortgage |
| possess a heightened sense of paranoia of getting | | | | payment resulting from a higher rate of private |
| involved in a mortgage transaction which might end | | | | mortgage insurance. Going back to the concept of |
| sourly and some are only concerned with getting the | | | | risk- less credit worthy buyers will have a much higher |
| best/lowest interest rate. | | | | private mortgage insurance component as part of their |
| I always, always, always try to engage these clients in | | | | monthly payment. This could add as much (or more!) |
| further conversation. Sure, I want their business but it's | | | | than a hundred dollars a month to your buyer's monthly |
| more than that. I know that if they think that simply | | | | payment- depending on loan amount. |
| asking for the current rate is enough- they need more | | | | 5. What amout of money were you hoping to use |
| information. And, I need it too- that is, if they want an | | | | toward down payment? If it is not 20% , were you |
| accurate rate quote! | | | | hoping to be placed into a home financing product in |
| There is just so much that goes into quoting a | | | | which you could avoid having to pay private mortgage |
| mortgage interest rate. Some of the questions that it is | | | | insurance? |
| helpful to have answers to prior to quoting a rate are | | | | Options do exist so that would be home buyers can |
| the following: | | | | structure their home financing so that they do not need |
| 1. Will the home financing that you are seeking be for a | | | | to pay private mortgage insurance. |
| purchase or a refinance? | | | | How does this affect the rate? It can affect the rate in |
| Although most people think this wouldn't make much of | | | | one of two ways. If a buyer has 20% or more to put |
| a difference- it could. With a refinance transaction, it | | | | down on a property they will not need to pay private |
| may cost a home buyer less to put more money | | | | mortgage insurance at all. If their down payment is less |
| towards closing costs up front resulting in a lower | | | | that 20% they can choose to go with a loan product |
| interest rate over the life of the loan. Even if this extra | | | | that is becoming extremely more popular- lender paid |
| money up front- paid in the form of points, etc. is 'rolled' | | | | mortgage insurance. (LPMI.) This will result in a small hit |
| into the refinance to allow the client to spend very little | | | | to interest rate. (This is simply an example- say, for |
| out of pocket cash at closing- it will still result in money | | | | instance, if current market rates are at 7.% your buyer |
| saved to the borrower. | | | | may be quoted an interest rate of 7.25% for lender |
| 2. If this is a purchase transaction- will this be your | | | | paid mortgage insurance. So, for this small hit to rate |
| primary residence or will it be an investment property? | | | | your buyer can put less than 20% down and still not |
| In the mortgage industry- everything, emphasize | | | | look at including a high private mortgage insurance |
| absolutely everything, revolves around the concept of | | | | quote in their monthly payment.) |
| risk. Lenders want to know that a borrower is able | | | | A second way that a buyer could look at avoiding |
| and willing to make their mortgage payment when it is | | | | private mortgage insurance would be to structure their |
| due. The commonly accepted assumption among | | | | home financing as two separate loans. (This option is |
| most lenders is that if a home owner falls on difficult | | | | good if you have a buyer looking for 100% financing.) |
| times, they are more likely to pay for the roof over | | | | Although these particular types of loans are fewer and |
| their own head than that of their tenants. For this | | | | further between as a result of tightening standards- |
| added layer of riskiness, folks who decide to move | | | | loans structured as 80/20s and loans structured as 75 |
| forward with the purchase of an investment property | | | | 25s still do exist. In both of these options, the second |
| are generally looking at a higher down payment | | | | smaller loan acts as the down payment on the first |
| (10-20% for a 1-2 unit property- sometimes higher for a | | | | loan. In both cases, the rate on the first larger loan is |
| three or four unit property) and a bit of a higher | | | | typically at or just above current market interest rates |
| interest rate as well. | | | | while the second smaller loan could carry a much |
| 3. Will this be a first time home purchase? | | | | higher rate. This type of loan works especially well in |
| In addition to quoting a rate, I often like to know if my | | | | cases where a buyer knows that they will be coming |
| buyers will be first time home buyers. Some of the | | | | into a sum of money where they will be able to pay |
| best rates and terms on the market are available to | | | | that smaller loan off first to avoid getting hit with all of |
| first time home buyers. In addition, if this would be first | | | | the exra interest that this type of loan will accumulate. |
| time home owner expresses that he/she does not | | | | A good example would be someone who currently |
| have a lot of money to use toward down payment | | | | has a home to sell. |
| and closing costs- I like to mention that there are | | | | The questions above are just a few of the questions |
| programs available that will help assist with this need. | | | | that I ask a 'rate shopper' when they call and refuse to |
| There is a program in Luzerne County (The Luzerne | | | | give any information other than the fact that they want |
| County Growing Home Owner's Initiative) that I tell | | | | to know what the current rate is. |
| buyers is the closest thing to free money they will find. | | | | Rate shopping is definitely not a bad thing- but |
| Of course, buyers need to meet the criteria- but if this | | | | informed consumers need to know that asking about |
| could help get a first time buyer into a new home- I | | | | rate is just the first question in any mortgage |
| believe it's a great idea and useful information. | | | | transaction! The question about rate should |
| 4. Do you have any idea what your current credit | | | | immediately be followed by further questions (and |
| looks like? | | | | answers given to the loan officer whom the |
| This can be a tough question as a majority of people | | | | information is being requested from!) |
| that I deal with on a day to day basis do not have any | | | | Remember to tell your home buyers that while rate is |
| idea what their credit looks like. Credit score will not | | | | important- it's not the only thing! Let's help get more |
| only be a large determinant in interest rate but also in | | | | educated buyers out there! |