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“No Points” “No Cost” “No Fees” = Higher Rates – ALWAYS

two-houses-blue-and-redNO FREE LUNCH IN LENDING

Real estate firms are constantly trying to get into the mortgage arena b/c they think it is easy money, and b/c they already have a captured market with their pool of agents.

They, however, invariably underestimate how difficult it is to run a mortgage company profitably and compliantly.

They also vastly underestimate how hard it is to find and train people who are talented enough to close ALL transactions (not just the easy ones) smoothly and on time.

This is why we so seldom lose relationships to “in-house” mortgage companies.

MAJOR REAL ESTATE FIRM OPENS MORTGAGE COMPANY

Along this line, a major nationwide real estate firm has recently jumped into the mortgage fray with its own mortgage company.

It is interesting b/c this is one of the largest real estate firms we have seen enter the mortgage realm.

Their offering is also interesting b/c they are touting “no cost” and “no fee” loans so aggressively.

B/c of this, we want to remind everyone that there are no free lunches in lending – ever.

The lower the fees, the higher the rates – always.

Also – the bigger the credit for closing costs, the higher the rates.

As I mentioned in a recent blog, lenders can get about 1% of the loan amount in additional “commission” or “yield premium” for every 1/4 percent increase in rate.

Whenever lenders (or builders) offer “no fees” or “closing cost credits,” they are also offering a higher rate to pay for them.

They have to … b/c there is no such thing as a free lunch.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646