No Lender Fees & Lender Credits = Higher Rates; No Free Lunches
We recently had a Texas borrower almost leave us for a competitor that was offering “no lender fees, no appraisal fee and a small credit for closing costs.”
Fortunately though, the borrower sent us the “Loan Estimate” from the competitor and we were able to see that the competitor was charging a higher rate.
In response, we easily matched the credit (and then some) and the interest rate, without giving up anything of course b/c we make more money when we sell loans with higher rates.
This simply illustrates something I blog about often – there are no free lunches (that is a link to an April blog that addresses the same topic).
A lot of lenders use reduced fees or closing-cost-credits to attract buyers, but those reduced fees and credits invariably come with higher rates.
The only exception to this rule has to do with some of the offerings from builder-owned mortgage companies.
B/c builders want to control the process so badly, b/c they want to make 100% sure all buyers are 100% qualified, and b/c they want to ensure they close on time (to maintain cash flow, bonuses, etc.), they sometimes give away the farm with their financing packages.
There is, however, a builder caveat too, and this is something my appraiser-friends point out often.
Builders sometimes also offer very competitive financing solely to entice buyers into paying above-market prices for their properties.
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