AT LEAST 12 QUESTIONS that should be asked before quoting an interest rate. A technical explanation.

I just HAD to blog today, and meant to YESTERDAY on the subject of interest rate quotes! Here in Wisconsin, I am constantly hearing from customers who are blatantly MIS-QUOTED on their rates, and it might surprise you as to WHO is misquoting! Believe it or not, the local banks!

So, as a service to realtors, consumers, buyers, sellers, other lenders, and anyone else within the mortgage industry, I thought it would be good to give you just a TASTE of SOME of the questions/issues, that affect both the interest rate, as well as the pricing of the loan! Pricing can mean alot of things, but is directed towards fees, closing costs, and/or points...which by the way, are NOT evil!

Great link here by Jeff Belonger!

http://activerain.com/blogsview/1010586/Buying-Points-on-your-Mortgage-arent-EVIL-Just-your-thoughts-are

THESE ARE THE 12 ESSENTIAL QUESTIONS THAT ARE CLEARLY NOT BEING ASKED!!

Are you looking to PURCHASE or REFINANCE? - The main question!!!!!!

1. Have you given any thought to what type of loan terms you are looking for?

2. How much are you looking to put down?

3. Where is the down payment coming from?

4. Do you have any idea what your credit scores are?

5. Do you want to escrow or not?

6. What price range were you thinking about?

If you are refinancing: 4 &5 also apply here as well!

7. Do you have a 2nd mortgage?

8. Are you looking to get "cash out" for anyone reason?

9. What are you going to use the "cash out" for?

10. What did you use the 2nd mortgage loan for?

11. Is this a single family home, multiple family, or 2nd home?

12. Has your house been listed for sale within the last 12 months?

Now, let's try to address the questions quickly, and one at a time! Their IMPORTANCE is what EVERYONE must understand! 1. This could be a HUGE difference maker...whether it is 100% USDA, FHA, Conventional, or one of the many "fringe" products that sill remain. All different rates, and structuring! 2. This greatly affects SOME types of loans, especially regarding condo's! However, on FHA loans for example, the more money down, the easier the loan is to get approved! 3. This may not affect PRICING but it most certainly affects the TYPE of loan a person can get! For example, if it is GIFT funds, and the customer has no real money of their own, then their options become very limited! If they are SELLING something like a boat, car, stock, etc...this creates more documentation that is required, and CAN once again, affect the TYPE of loan the customer ends up with! 4. Credit scores as well all know are HUGE today...it seems different lenders as well as different TYPES of lenders, have different adjustments in this area...but based on the credit score, there can be HUGE adjustments to the pricing of a loan! Again, FHA doesnt have as much issue here...but it does vary from loan type to loan type! 5. Waiving escrows is not an option on loans above 80% LTV, however, at or below 80% of the value of the home, a customer CAN waive having an escrow. In many cases, this is a 1/4 point adjusment, or FEE! There are some lenders that only charge 1/8th to waive, and even Countrywide, doesnt charge you at all to waive escrows. Fannie Mae standard adjustment though is .25% 6. Price range only really comes into play in areas where property values and prices are really really LOW! There are adjustments to pricing for the POSITIVE on loansn like USDA loans (100% financing), and it is clear today that lenders want medium size loans...not small ones, and not HUGE ones! Nice, level, risk! 7. If there is a subordinate mortgage, commonly referred to as a 2nd mortgage, that you are NOT paying off, there is a standard adjusment of .25% to the pricing, or FEE. 8. CLEARLY, today, there are massive adjusments regarding CASH OUT loans! Even the Mortgage Insurance Companies, have CUT BACK drastically on what they will accept! It appears they are pricing a customer OUT OF REFINANCING by making it so expensive, you cannot afford to do it! However, LOAN vs VALUE, AND, CREDIT SCORE combine on this one! 9. The use of the "cash out" is pretty big as well! Some people get offended when we ask them "what are you going to use the money for?" Truth of the matter is that if a person is "cashing out" to payout a divorce, it really IS NOT a cash out loan....but, if they are using the money to consolidate credit cards, put an addition on a home, or buy something..then it IS a cash out loan! BIG PRICING DIFFERENCE HERE!!!!!!!! 10. Again, if the 2nd was used to purchase the home, it becomes what is called a RATE & TERM REFINANCE.....anything else, pretty much will be considered "cash out" and subject to additional add ons to pricing/fees! 11. HUGE ADJUSTMENTS on your rate & pricing for property type right now...even if you live in it! VERY IMPORTANT! 12. Most lenders care if it has been listed in the last 12 months, but some will allow you to refinance it if it HAS NOT been listed for at LEAST 6 months! Not a pricing change here YET, but definitely can make you IN-ELIGIGBLE to refinance the home!

Confused yet? Ill bet you are? Can you see how this could cost you ALOT of money?? What does this all mean you wonder? Now, you are thinking "I am totally confused" !

One more reason to have a seasoned professional helping you with mortgages!

I want you all to think back to the last time you purchased or refinanced your home? Did your lender ask you at least these questions, or show this amount of interest??

I will and I do!

No offense intended towards any BANK in this blog, and I would also like to add a disclaimer that I am CONFIDENT that I am leaving several things out regarding pricing add ons!

POINT IS PEOPLE, THIS IS A TRICKY, CONFUSING, DIFFICULT, INTENSE, and STUDIED business!!!

Partner with someone who can figure it out, and not hope that when the customer is sitting at their desk, they will understand they made a mistake!

As always, I LOVE discussion and emails!

You can reach me at Darin@osmwi.com

608-592-2227

"Your lender for life"