4 Questions Every Lender Should Be Able to Answer!
The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell who is qualified?
Here are four simple questions your lender must be able to answer correctly. If they do not know the answers… run… don’t walk… to a lender that does!
1) What are mortgage interest rates based on?
The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note and NOT Prime. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.
Now Prime is used for one type of mortgage loan in our industry and that is the Home Equity Line of Credit. Prime is set directly by banks, it does not react to fluctuaions in the bond market and typically tracks around 3 percent above the Federal Funds Rate. DO NOT work with a lender who has their eyes on the wrong indicators. After all, you want to ensure that you are getting the best program and rate possible.
2) What is the next economic report or event that could cause interest rate movement?
A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, contact us.
3) What is happening in the market today and what do you see in the near future?
If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week’s newspaper.
4) When the Fed “changes rates”, what does this mean… and what impact does this have on mortgage interest rates?
The answer may surprise you. When the Fed makes a move, they are changing a rate called the “Federal Funds Rate”. This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction of the Fed change, due to the dynamics within the financial markets. For more information and explanation, just give us a call.
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but we do this every single day. It’s your home and your future. It’s our profession and our passion. We're ready to work for your best interest.