The recent financial reforms have changed the way mortgage rates are presented to customers. There are now two options; one is called ‘consumer paid’ and one is called ‘lender paid’.
Those terms talk about fees. We’ve spoken a lot about traditional origination fees of 1% and my flat fee of $1875. Well, the government believes that financial reform would change the way it’s presented as well as the fees. The government is looking towards getting the mortgage companies away from percentage based lending.
That means that either the consumer pays me the origination or the lender pays me the origination.
Let me explain it this way: when the consumer pays the originator, it brings the interest rate to the lowest rate available. When the lender pays the originator, the lender must find money for that cost, thus the interest rate moves up (basically getting to money to pay the origination from the client).
I looked the other day at a rate sheet for the lowest PAR interest rate – on that day it was 4.75% on a 30-year fixed rate loan. As I looked at a lender paid rate sheet, the rate would be 5.25%. The interest rate went up almost 0.5% to have some of the closing costs paid by the lender. Now this is going to be interesting because, again, I like the lowest rate possible and I hate paying fees unless they’re justified. From listening to the majority of the lenders on the market, most of them are going to be pricing their loans as a lender paid in order to generate the income per file that is necessary for them to keep their doors open. They have to bring in $3,000, $4,000 or $5,000 on a transaction; they have no idea how I am able to operate at $1875……but I do….and it works!
So if I’m at 4.75 and charge $1875 and the other guy’s at 5.25% and has say $1,875 less in fees, over the life of the loan – any loan amount, – we’re talking about big money. To me it’s a no-brainer.
We’ve spoken before about the possibility that I am the only crazy person who charges as little as I do to organize a mortgage loan. That was proven to me the other day. (I’ll go into that in a future article.) I charge $1875 as a flat fee and my average loan size is around $285,000 which is well below the 1% that’s typical of our industry. As my loan amounts climb to $400,000, $500,000, $700,000 and I still maintain my $1875 fee…well, that’s just unheard of in the industry. Everyone charges more for a more expensive loan. I’m a good commodity when you’re buying a $400,000, $500,000, $600,000 or $ 700,000 home.
Thanks for reading-
Honored as one of the Best Mortgage Brokers in Dallas! for D Magazine, 2011 & 2010. Ranked 24th in 2010 in the category Largest North Texas Residential Mortgage Lenders, according to the Dallas Business Journal!
Geoffrey is the “Frisco Mortgage Guy”!
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