Many consumers turn to sites that publish On-Line Interest Rates, Don’t be Fooled by their Tom Foolery and deceptive practices!
“…Providing Twitter Rate Alerts as Mortgage Rates adjust and Relevant Mortgage News and other Financial News”
I thought this was an interesting way to educate the mortgage shopping public. Unfortunately I was wrong! In reality in appears their main goal is to attract followers.
After reading their on-line profile I headed over to their On-Line Interest Rates site and was shocked to see that lenders advertising on their site aren’t offering the best rates. Take a look at the screen cap on the left, the advertiser Close Your Own Loan claims (highlighted in green), “We eliminated the Loan Officer. You keep his commission!” This claim is clearly deceptive! Makes me wonder who’s handling your loan and who has access to your sensitive personal information?
Today that same rate of 4.750% (highlighted in red), being offered by Close Your Own Loan with Trust One Mortgage pays a rebate to the borrower of 1.00% or $2,000 which can be used to cover your closings costs. So, not only are they charging you one point to put you in a loan with an interest rate of 4.750%, they’re getting a rebate of at least 1.000% of the loan amount. Where’s the commission they claim you get to keep?
Take a look at Ditech’s on-line interest rates (highlighted in purple), that same 5.125% rate with Trust One Mortgage pays a rebate back to you the borrower of 2.875% or $5,750, that amount will cover almost all of your closing costs, maybe even the whole amount depending on the service providers (title & escrow), you choose.
What about CapWest Mortgage’s on-line interest rates (highlighted in yellow)? Apparently the person posting their rates couldn’t decide if 4.625% should be at par (no cost), or cost you a point!
I speak with clients and potential clients every day who see charts like this one to the right on the Internet and want to know why they can’t get the on-line interest rates advertised in the chart. I’m betting you’ve seen these charts yourself and have contacted several mortgage lenders or submitted an on-line quote request only to find out that these on-line interest rates aren’t attainable without paying substantial points.
So, How do they get these rates?
These rates are typically an average of interest rates quoted by loan originators who buy leads from sites such as Lending Tree. What sites like Lending Tree do is take a sampling of all the quotes submitted for a 30 year fixed rate loan and compute the average of all the rates in an effort to get you to submit a loan request, it’s how they make their money!
On-Line Interest Rates, Don’t Be Fooled, What can you do to get the best possible rate?
First things first, make sure you’re working with a licensed mortgage professional, you can check their license status at the Nationwide Mortgage Licensing System and Registry (NMLS). If you’re in California you can also check the license status at the California and Financial Services Website.
Second ask your family, friends, co-workers, or REALTOR® if they have a preferred mortgage professional they like to work with. If not do some Internet research to find a professional in your area or search out reviews on the mortgage professional you have elected to work with to obtain your home loan.
Unscrupulous mortgage brokers are abandoning old illegal Bait & Switch techniques in favor of new ones. The new Bait & Switch techniques are based on inflating a home’s value in order to lower the loan to value (LTV) and quote you a lower interest rate in order to secure your business.
If loan officer “A” thinks your home is worth $280,000 and you are interested in a loan of $250,000 (a LTV of 90%), he will quote you a rate based on 90% LTV. If loan officer “B” thinks your home is worth $312,000 that same loan now has a LTV of 80%. The difference in interest rate between the 90% LTV loan and 80% LTV loan is going to be significant. Loan officer “B” employs the new bait and switch to quote you the 80% rate instead of the 90% – even if he knows it is a stretch for your home to be worth $312,000.
Once they’ve secured your intent to proceed they’ll come back and tell you your home didn’t appraise at the inflated value, so they’ll have to increase your interest rate. Here’s what you can do to protect yourself from the “value bait and switch:”
- Get familiar with what your home is actually worth. When you talk with loan officers ask them to fax or e-mail you copies of the comparable sales reports that they are using to make their estimates. You’ll be able to see the home data that they are looking at and make a determination of what your home is actually worth.
- Ask each loan officer you talk to what they think your home is worth and take an average. If one loan officer seems way off the map, remember the old adage: “If it’s too good to be true, it probably is.”
- Do some research on-line and see what other homes in your area are currently listed at on sites such as Trulia.com and Realtor.com. Use those figures as a rough guide.
- If a loan officer tries to over-value your home, fight the ego-driven urge to go along with it and try to find a rational approximation of its worth based on the above research.
In short you can prevent being fooled by on-line interest rates by knowing the approximate value of your home and working with a trusted licensed and knowledgeable mortgage professional.
Category: Real Estate