Every consumer wants to get a fair and reasonable deal on the cost of borrowing funds to refinance your home or purchase a home. However, how many people get fooled into is believing that whatever they’re seeing on the internet or receiving in their mailbox is the best choice for them. Here is what you need to know about the fine print and more specifically, how the mortgage industry works in reaction to interest rate movement.
It’s no question the mortgage industry is a commodity-driven product driven by the cost of debt. When rates fall, application volume for refinances increases and refi shops open. When interest rates are rising, refinance application volume drops, but home sales usually remain stable.
Be an informed consumer… when you receive something in the mail about a mortgage advertisement you must always make sure that you’re reading the tiny fine print. It is common the fine print usually says offer based on the following two discount points, max loan sizes or rate and term refinance only among other variables. If you don’t fit those parameters you’re not going to get the same type of interest rate that you otherwise might think you would.
Know this: lenders offering extremely low interest rates and terms, are looking for a certain type of borrower. They are looking for a very strong, financially sound borrower who they can get an application from quickly, fund and close as quickly as possible and then move on. They are volume shops. Churning as many loans as possible is their modus operandi.
If your scenario is anything south of financial perfection you will have a tough time obtaining that loan if it even closes. You heard that right, if a lender is offering an extremely low interest rate and price, they’re also going to be extremely conservative and how they look at and underwrite your loan whereas another lender might be a little more flexible with regards to getting your loan completed but may come at a slightly higher cost.
Unfortunately, in 2019 the practices of offering extremely low rates as a bait to the consumer and then only to change it on them when their credit scores different or when their financial scenario is different, it is something that is still within the mortgage industry. All credit decisions are based on the lenders review of your cash, credit and income.
If you’re looking for a competitive loan it might not be a bad idea, especially if you’re not getting a response, to get a second opinion. It might be worth it for you for cost and ease of doing business, and your sanity.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.