Shopping For Mortgage Interest Rates
Shopping for the best interest rate has always been important when buying a house. A difference in rates as little as 1/4 % can make the difference between an affordable house and one out of reach. The challenge with shopping for rates in the Frederick real estate market, as with as any market, is that what you see is not always what you get.
Bait and Switch
All the marketing you run into, from internet, tv, radio and printed ads, have been designed to make the lender’s phone ring. Sometimes, the information can be misleading. When the consumer sees an unbelievably attractive rate, and gets drawn in by a lender, they can experience the ‘bait and switch’ technique.
This is often done through what’s called “short pricing”. That happens when the attractive advertised rate is only locked-in for a brief period of time. It usually takes a minimum of 30 days, most of the time longer, to go through the process of finding a home, making an offer, negotiating a ‘meeting of the minds’ between buyer and seller, and ratifiying the deal, going through the home inspection, going through the loan qualification process, and finally, getting to settlement. Pricing on an interest rate locked in for a 10-day period is of no use to the prospective buyer; it just isn’t enough time to be of use. Of course, the lender will have a different loan program with a higher rate available to you, and you will most likely be too frazzled to look elsewhere, and it will most likely be too late in the process anyway.
Read the Small Print
Another common marketing trick that makes interest rates look attractive is in the way that the fees are presented. By law, all lenders are required to state their costs through the APR (Annual Percentage Rate) each time a rate is quoted. The fees are usually in the fine print with the interest rate in large bold print. Usually that great rate is only available with the payment of 1 or 2 points. (If you were listening to a television or radio advertisement, the small print would be the extremely fast-talking guy after the pitch.) To add to the confusion, you need to know that all lenders don’t calculate APR in the same way, so its not always easy to really compare rates.
Navigating Shark-Infested Waters
By now, hopefully you are asking, “How do I navigate through the process of finding the ‘Truth-in-lending’ before I get on someone’s hook?” My answer to this, is get a referral. Most people don’t even take their pet to a vet without getting references; how much more important is it to get references on the most important investment you’ll probably make in your lifetime, purchasing a home?
A Referral is Gold
Most Realtors® have a handful of lenders that they use regularly; We do. We have relationships with some of them that go back 22 years. It is in our best interest to make sure that buyers we work with are fully satisfied with every Frederick Real Estate professional that we put them in contact with, from lenders, to home inspectors, and a host of handymen and roofers in between. If our clients aren’t raving about their transaction with us and our associates, we are not going to count on any referrals or repeat business, which is what the real estate industry thrives on. Instead, we can count on negative referrals, and no one wants that!
I know it’s true with me, if I’m not happy as a consumer, I’m going to tell a dozen of my friends about my dissatisfaction. If I’m thrilled with my experience, I’ll probably tell about half that many. As much as any industry, Real Estate is a relationship business, and a good referral is worth its weight in gold.
If you are looking for trustworthy lenders, home inspectors, or other real estate professionals, give us a call, or call a Realtor in your area, we’ll pass on some names to you that you can trust.
Chris & Karen Highland * 301-401-5119
Broker – 410-777-5714