My friend Maryellen at KMG Mortgage is a wealth of information. I am happy to post for my clients and readers this educational information. If you are shopping for a mortgage, KNOWLEDGE IS POWER! And also, often many hundreds of dollars left in (or missing from) your bank account when the dust settles! Thanks Maryellen!
How to read a lender rate sheet:
How on-line lenders bait & switch and use "Fine Print" to mislead you!Okay, this is going to get technical - have hope, however, it's not that long. So, get out your calculators and we'll get started...
But, before we begin, here is something you need to know:
If a number is bracketed ... (.125) ... it means it is a CREDIT to the pricing.
If a number is not bracketed ... .125 ... it means it is a COST to the pricing.We will use the following scenario for our example:
Every lender rate sheet is different, but mainly consist of (at least) 2 main parts:
- The rates
- The adjustments
The Rates:
So, what does this mean ... in English? Pay attention to the red blocks below. On a 15 day lock, 4.500% is PAYING (.104%) and 4.375% is a COST (AKA: Discount Point) of .319%.
The adjustments:
In our scenario above, it doesn't sound like there will be many adjustments to the pricing (30 year fixed, full documentation, VERY good credit) and, thus, have little affect on the interest rate? Right? Think again...
The adjustments aren't many, but they have a HUGE affect on the final interest rate offered to the borrower:
Our final adjustments are a COST of 1.250%. So, we must go to the rate sheet above and find a rate that is PAYING at least (1.250%) to off-set our COST of 1.250%.
So, what's our final rate???? 5.125%
Rate
Pricing
5.125%
(1.329)
Adjustments
+ 1.250
Final Pricing
= (0.079)
This is where on-line lenders bait & switch and deceive their clients! They can, legally speaking, advertise the 4.500% rate because it is paying back (meaning, they can offer it to the client without a cost to them for it). What they don't advertise is the adjustments that go along with EVERY SINGLE loan that exists.
So, next time you're in the market for a home loan, whether purchase or refinance, please consider giving KMG Mortgage Group a call. We are local to North Idaho and Eastern Washington and will be happy to meet with you.
Maryellen Garasky
Mortgage Broker
KMG Mortgage Group
(208) 664-3600
(509) 638-3455
www.kmgmortgagegroup.com
Janna Rankin Scharf provides a superior level of real estate services to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com to search for homes in the Coeur d'Alene MLS for anywhere in spectacular North Idaho.
No matter how grand or modest your real estate dreams may be, you can turn to me in confidence. Give me a call today and let me know what I can do to be of service to you!
Janna Rankin Scharf AB, GRI, CSP, CNS, CLHMS 208.651.9700
Great reblog Janna. Education is the key to folks not being taken for a ride by an unscrupulous lender.
I was beginning to wonder where you had gone - haven't seen you on Facebook, either. I was missing my cyber buddy!
Glad I could help!
Maryellen
Part of my business plan for 2009 calls for me to be up and out the door by 7:30 and at the (real) office in my desk and making it happen, by 8:00! I have been wildly successful, but that means getting up at 5:30, which means I fall asleep early at night and no longer get to spend those late night and wee morning hours blogging! I have really missed my AR life. Have to figure out how to get blogging time back into my schedule! You should be seeing me on Facebook, I usually visit there several times a day to torment my kids. ;-P
Hi Janna, Great information here. Should I have already known this? I don't know !! But I know it now!! Thanks for the post!
Hi Janna, Yes I admit that I was alittle timid about posting to the larger audience. Just wanted to start getting some content on my localism page. I have been commenting on a lot of other blogs, just went through the long list on my home page the other day and deleted a bunch to clean the slate. I do enjoy reading the wealth of information out there and to you, Janna, I give the credit for getting me started. I did make a goofy mistake the other day by accidently deleting my "Doing the right thing" entry. Fortunately I had the text saved in a document file. Had some nice comments on it from others too. Oh well, lesson learned! See you soon.
Good Post, I'm glad to see you are at Keller Williams
Janna,
Thanks for reblogging this; it's a good, clear explanation of pricing.
Mike in Tucson
Janna,
The Client's are always confused when they hear that the Fed has dropped rates and their Lender tells them that they can't lock at the rate they quoted the day before because rates have gone up....very confusing.
This is why the professionals are key to ensuring a smooth transaction....thanks for the post.