I wrote a post that touched on the subject of shopping for fees instead of rates:
https://www.city-data.com/forum/mort...-shopping.html. I wanted to expand upon that post a little more. The rates I listed in that post have been available for years. The only difference between now and two years ago is that the fees for those rates are a lot lower today than they were two years ago. When you hear, “mortgage rates are dropping”, what’s really happening is that the fees for those rates are dropping, not the rates themselves. It only appears that rates are dropping because lenders will advertise the lower rates as the fees drop down. Lenders will continue using rates to draw your attention and ultimately catch you because it works, even though we all have the same rates...
For example: A 2.875% 30–year fixed rate is currently available at every bank, non-bank lender, and broker in the country. The difference will be what each company is charging you in fees to get that 2.875% rate. On top of this, those fees will vary depending on your scenario, because of pricing adjustments...
Pricing Adjustments: Just about everyone knows that your credit will impact the pricing of your loan. A person with excellent credit will generally pay lower fees than someone with poorer credit in the same situation. Many people also know that the amount of equity you have in your home can impact your pricing, depending on the loan product. But very few consumers know that the size of your loan can also greatly impact the pricing - To a certain extent, someone with a $425,000 will get better pricing than someone with a $125,000 loan
Example: Two guys have the same credit and equity position but, one guy has a $125,000 loan amount and the other guy has a $425,000 loan amount. The guy with the $425,000 loan could proably get a 30-year fixed rate at 2.875% to 3.125% with no fees. The guy with the $125,000 loan would pay about $5000 to $6000 in fees to get those same rates. Huge difference.
When choosing a rate, select the one that benefits your situation the most. I’ve done tons of no fee loans for customers over the years. I like no fee loans but they are not always the best way to go. If you plan on moving soon but you want to lower your payment in the meantime, a no fee loan would be great. Or, maybe you refinanced six months ago and paid fees - a no fee loan would be nice so you can avoid paying fees twice. Or, maybe you feel that rate pricing is going to drop in a few months but you don’t want to miss out on what’s available now; a no fee loan would, once again, work out great. Many lenders promote “no fee” loans because they know that’s what consumers like to see.
Finally, don’t think the lender is “getting over on you” when it comes to paying fees. The lender wants your business, fees or no fees. They honestly could not care less if you pay fees or not. And the loan representative you are working with get’s paid exactly the same regardless of your rate and fees. You could get a 9% rate with $20,000 in fees and your loan rep gets paid the same as if you got a 1% rate with no fees. They don’t care because of the Loan Originator Compensation Rule:
https://www.federalregister.gov/docu...t-regulation-z This rule prevents us from being compensated based on terms like the rate and fees.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Apr
