We are here to help you with the numbers. Some issues are more complex and some are just arithmetic . Where we use “cost” what we mean is out of pocket costs you end up paying, either at closing or by increasing your loan amount to cover them. It should be just as would appear on a good faith estimate, fully disclosed, no surprises.
Here’s an example for a 30 year fixed rate mortgage:
Loan amount $350,000
Rate 4.00%
Payment $1,671
Total cost $7,000
alternative
Loan amount $350,000
Rate 4.50%
Payment $1,773
Total cost $0
Let’s do the math:
Divide $7,000 by the difference in the payments. $102/month, and it becomes clear that it will take almost 6 years to recoup the cost. Not a great deal for most of us.
Were the payback time less than 5 years, we might encourage it. Were it less than 4 years, we would encourage it, assuming the client planned on retaining the residence at least longer than the payback period. It’s always your choice.
It’s just arithmetic and perspective. And relationship.
Lock Strategy
If the rate today is 4.25% for a 45 day lock, should you lock or float? It’s really not that complicated. Rate trends follow smaller cycles and longer cycles and frankly, I don’t have a crystal ball. Rates could go up or down.
Here’s my answer: if your current rate is 5%, what’s to lose by a .75% improvement? That is, assuming the cost does not involve out of pocket cost or the costs will be recouped in a very short time.
Alternatively, if the difference in rates is smaller, we would encourage you to tender your application, watch rates, and lock later. Fact is, shorter lock periods off lower costs.
We will be happy to chat with you as long as you wish. You can reach us very easily. Our job is to educate you to make the best decision to suit your needs. We will ask you a lot questions. You can ask us even more. THE MORE YOU KNOW, THE BETTER IT IS FOR BOTH OF US.
The loan process is as follows;
1. Consultation: talk to us about what you want and who you are.
2. Application: collecting documentation and signing paper, a few easy questions.
3. Processing: we order credit and title reports.
4. Submission: we send your package to the source that offers what you want. An appraisal is ordered, typically, through an appraisal management company.
5. Approval with conditions: believe me, there’s almost always something.
6. More processing, order insurance.
7. Locking the program or rate: this step can occur earlier if appropriate to your needs.
8. Ordering loan documents
9. Signing loan documents: done with a notary, often at an escrow company.
10. Funding: the Lender wires the funds to the closing agent.
11. Closing: your loan documents are recorded and funds are distributed.
Normal turn around time can range from a few days to many weeks, depending on how busy the lending entity is. Yes, an automated approval can happen the day we have all of your documentation, but they are conditional. Rates can be locked anytime, but better pricing is available after approval.
We earn our fees by counseling you to find the best fit to your individual needs and then preparing and sheparding your application through the process. It is a very creative occupation that seeks to overcome issues as we go along. Certainly there are easier loans and harder loans. We do whatever it takes to get the job done as quickly as possible. We would rather quote a rate high and deliver it low, estimate longer, and get done sooner, and manage your expectations so that we are realistic and you are not disappointed. It isn’t that hard: it just takes diligence and resources. And it pays us great dividends in repeat and referral business.