I wrote Monday about the debacle Heejin and I endured after we chased interest rates in Texas (the bank lost our file for 17 days). Interestingly, the bank is now trying to save the deal and won’t take “no” for an answer, but we know there is no way it can perform in time.
I also mentioned Monday that I would follow up with a discussion in regard to different rates among different lenders and how we compare.
Many Things Affect Someone’s Rate: First and foremost, we need to remind everyone that there is no “one rate,” as many factors significantly affect rates. These factors include: Credit Score, Property Type, Loan Amount, Down Payment and Property Usage. Credit scores alone can easily affect an interest rate by over 1%.
Advertised interest rates often do not account for the above factors.
We Do Rate Surveys: Several times per week, we survey multiple other mortgage banks at both the wholesale and retail level. This allows us to ensure we are not only competitive, but actually have lower rates than many of our competitors in the mortgage banking channel.
Estimating Realistic Rates: Many lenders quote unrealistic rates during the pre-approval stage or even after a purchase is in contract. During the pre-approval stage, some loan officers know they can quote unrealistically b/c the market will move before the borrower gets into contract. We quote conservatively to ensure borrowers are comfortable with their payments, to give the borrowers wiggle room (for qualifying) if rates increase, and to make sure we don’t create false expectations. We lose borrowers from time to time b/c we are honest…and we are going to keep being honest.
Online lenders also often quote rates that can only be locked for very short periods (7 days for example). This too is misleading, as markets often move before a loan is ready to be locked for such a short period.
Big Banks. Yes, the big banks and credit unions can sometimes offer lower rates for high balance and jumbo loans. This is b/c their cost of funds is so low (they can lend deposits). We can, however, literally run circles around the big banks with respect to service, know-how, responsiveness and even interest rates for certain loan types like FHA, VA and many conforming loan options.
Private Banking for Wealthy Borrowers. To paraphrase M.C. Hammer…we can’t touch that. Nobody can. It is in our training even: when we get a borrower with a 30% down payment and $400,000 in her Wells Fargo account, we will tell her to check with Wells Fargo’s Private Banking to see what they offer. Private Banking divisions will offer extraordinary deals to keep high balance depositors happy. Often, however, even private banking customers will still use JVM b/c they need our speed, service, reputation and/or our skilled appraisal panel.
Final note: Many of our former employees who have gone to work for other lenders have come back to us for mortgage financing. In addition, we have obtained loans for numerous “big bank” employees who used JVM instead of their own employer. There are very few lenders, if any, who can make this claim.
Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646