"What's your rate?"
When you turn on the flicker and all you hear is market doom and gloom and our continuing credit crisis, it's because the originator on the receiving end of this question responded by saying:
"What do you want it to be?"
And low and behold you were SOLD a rate! You called Lender after Lender...the scenario played out something like this:
SCENARIO #1
Borrower: "What's your rate?"
Honest Lender #1: "Well Mr. Shopper, rates are based on a variety of factors: credit score, income... [CLICK! Mr. Shopper just hung up!]
SCENARIO #2
Borrower: "What's your rate?"
Honest Lender #2: "Today's 30-Year Fixed Rate Mortgage is pricing between 6% - 6.24% for strong credit borrowers and a conforming loan amount.
Hello?......Hello?.....Mr. Shopper? You there?" [Of course not! He hung up again!]
SCENARIO #3
Borrower: "What's your rate?"
Loan Hack: "What do you want it to be?"
Borrower: "Well the Fed just cut the rate right? I'd like a 30-Year Fixed at 4.5%. I know I should get that cuz my home has a lot of equity. Zillow told me so!"
Loan Hack: "No problem!" [Didn't Irina Netchaev our Pasadena Realtor® teach us to eliminate this phrase from our vocabulary?]
Borrower: "Oh...and I don't want to pay points! I got a flyer from Washington Mutual and Countrywide offering NO CLOSING COSTS! [Hmmm...why are you calling around then?]
Loan Hack: "No biggie. We have a 30-Year Fixed for you. I'll just mis-represent the GFE and put you on one of our Hybrid Option ARMs. It's all gonna be fine so don't worry! Now what's your social?" [Hybrid Option ARM; yup this product is still around last I checked. I'll double check just to be sure.]
There's a ton of things wrong with this scenario...
- The Fed Funds Rate Cut has NOTHING to do with the markets 30-Year Fixed Rate Mortgage. The rate cut only affects rates on credit cards, car loans, secondary home financing and the various indexes to which adjustable rate mortgages are tied. The rate on the 30-year fixed rate mortgage will only rally as a result of the markets reaction to the rate cut; the rate cut itself doesn't affect the rate.
- You're not quoted a rate without taking an application and running credit first! If you are, that rate's about as good as an empty gift card.
- You don't use Zillow to determine your property's value! Would you want your dentist performing your open heart surgery? Sure he's a doctor but I wouldn't trust him...would you?
- A Good Faith Estimate is just a piece of paper. You want to know what your closing costs really look like? Ask escrow for the estimated HUD.
Now a full year later
- Your principal balance has gone up some $8,000...
- Your property is located in a depreciating market so slowly you realize you owe more than the home is worth...
- And, you fell off the ladder at work so there's no money coming in!
You see that over on the horizon? Yeah...can you say FORECLOSURE?
Unscrupulous lenders like this perpetuated the dilemma we face in our industry today! But rather than complain about their wrong-doings and pout about this dilemma, let's share with others what they can do to avoid this situation all-together!
READ ==> The Mortgage Application Process: getting a mortgage the right way! from my new Home Buying 101 Series
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