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Interest Rates Hit Record Low; Closing Cost Tricks Big Banks Play

When will rates bottom out? Will the Fed cut rates again?

CLOSING COSTS ARE ALMOST THE SAME FOR ALL LENDERS

A buyer said this to me yesterday: “Both of the banks I visited offered to match your rate and give me $4,000 less in closing costs; I only went with you b/c you could close on time and the banks could not…”

Both of those banks were misleading our borrower though because closing costs for most purchases are almost the same no matter what lender is used.

This is b/c most closing costs are charged by third parties and are outside of the lender’s control.

Many banks simply don’t disclose all of the potential closing costs in an effort to make their offers more appealing.

I blogged about this last year in fact and thought the topic was worth repeating b/c I see the issue surface so often – 5 Misleading Closing Cost Tricks Big Banks Play.

INTEREST RATES HIT ALL TIME LOW – SORT OF

I am addressing interest rates again b/c today’s lows are all over the news.

Here are just a few random thoughts/reminders:

  1. Rates are about the same as yesterday’s. Even though we keep hearing about “all-time lows,” rates are only moving marginally, with today’s rates almost identical to yesterday’s.
  2. Capacity issues and delays. The mortgage industry has the capacity for about $1.5 to $2 trillion in total loans funded, but some industry watchers expect total volume to approach $5 to $6 trillion this year. Every lender in the industry is scrambling to handle this excess volume, but there will be delays – particularly on the refi front. Purchase-oriented lenders will of course prioritize purchase loans to ensure there are no missed closing dates. And finally, mortgage rates would be even lower than they are if there were no capacity issues, but many lenders are keeping their rates higher to control volume.
  3. Early Pay Off Penalties. These penalties strike terror in the hearts of all lenders when rates are falling, as we are all subject to large penalties whenever a loan that we fund and sell pays off within six months. This is why we ask all of our clients to please not refinance for six months and it is why we do not refi loans that funded at other mortgage companies within the last six months.
  4. When will rates bottom out? Will the Fed cut rates again? Nobody knows when or where this slide will stop, as it largely hinges on what happens with the coronavirus and related concerns. Additional rate cuts by the Fed now seem likely this year, but this may or may not influence mortgage rates as I mention often. This recent blog is one of many examples.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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