Today, I wanted to talk about the crazy amount of overpromising that I’m seeing in the industry – others making promises about interest rates. What started this train of thought is that I saw a refinance TV ad. They were talking about conventional loans with a 5.125% interest rate and APR.
I can tell you: As of today (who knows what is going to happen with rates in the future), if you can get this rate on a 30-year fixed mortgage, you should lock it in and don’t look back… as long as it doesn’t have a million points attached to it.
Bait-and-Switch Tactics
This is the situation we saw here at the office a few days ago. One of our clients had another lender promising them 5.125%. We told them that we weren’t even close to it. Go ahead: call the lender and get it locked in, then send us an estimate. We give it our blessing because you are scoring the most amazing rate possible!
They went and talked to the lender, did the application, pulled the credit, and got it locked in – everything. Then, they sent over the estimate: on a $500k loan, they had $37,000 in points to buy the rate all the way down. It would be among one of the worst financial decisions you could make.
These are the kinds of things you are going to see out there!
Credit Bureaus are Selling Your Information
The other one that drives us crazy: we pull someone’s credit, and it triggers leads. The credit bureaus sell the data to other mortgage companies, who then start blasting the borrower with messages and phone calls as they are trying to poach the client.
They start making a lot of promises, such as super-low rates, even if they don’t know anything about the borrower.
All Lenders Have the Same Source of Funds
Remember: all lenders have the same source of funds. In almost every case, our funds are coming from Fannie, Freddie, FHA, and VA loans. And that’s it! That’s where the money comes from. Since everyone has the same general cost of funds, if you see a big outlier like that, then it means that they are most likely full of crap in most cases.
If It’s Too Good to Be True…
Watch out for these things! There will be a lot of refinancing coming up, and hopefully these rates will drop down. But you need to be careful, especially when the promises seem too good to be true. I think their tactic is to get the borrower super excited and far enough into the process that they are committed… then when the information and offer changes, homeowners cave and agree to any terms because they are already so far into the process.
Please don’t get caught up in this! Give us a call any time. We are happy to take a look and let you know what is going on. If you already have an estimate, then we can see whether it’s a good deal or not. Or, just give us a call first if you want peace of mind knowing that you are working with an honest team. We are always here to help!