I realize that humans are conditioned to shop. Without shopping, it would be impossible to find those golden nuggets in life called “good deals.”
Shopping is satisfying our gut instinct by removing suspicion and doubt that a better deal exists. Therefore, when we shop, we are essentially selling ourselves.
We become “sold” when our gut instinct says “hey, I am happy with the facts we gathered here… let’s go ahead and make the purchase.” Shopping is more than looking for a good deal. Shopping is also conversation and bragging rights.
When it comes to VA mortgages, we tend to shop for a home loan the same way we shop for everything else. We look for the lowest interest rates and when we find them, we act on emotion and gut instinct. Unfortunately, this is a recipe for disaster.
- In this article I’ll examine mortgage rates and the false perceptions surrounding them.
- I’ll prove to you that it’s impossible to accurately shop for VA interest rates over the internet (unless you know what your doing.)
- You’ll also discover why cold calling banks and asking for VA rate quotes is a colossal waste of time.
- And just when you think it can’t get any sweeter- I’ll teach you how to become a true mortgage ninja by removing the VA rate question from your vocabulary and learning to focus on what really matters.
Without further adieu, the first lesson is to stop comparing yourself to everyone else when it comes to interest rates.
Why? Because interest rates are like DNA, and the rate you get is unique to your overall financial situation. Credit score, debt to income ratio, equity position, property location, and loan type ALL play a factor in final interest rate. To accurately quote rate you must have all these questions answered. No exceptions!
By understanding what is needed to accurately quote rate, you should also be able to see why cold calling unknown banks is a complete waste of time. Stop doing it.
To be fair, banks do fish for your business.
A fisherman uses “bait” to catch fish. Banks use “interest rates” to catch rate shoppers. Banks understand that the typical shopper is not super savvy and banks use interest rates as lures to bring in customers or solicit calls. Some banks will go as far as publishing rates they know only a small percentage of the population can qualify for. These are often called “teaser rates.” Why would banks do such a thing you ask? Because uneducated rate shoppers “bite” every time.
To further my point, I am posting an email solicitation that I received from Bankrate.com
Bankrate.com, the internet’s leading aggregator of financial rate information can help grow your business by reaching our highly qualified and desirable audience. With an average FICO score of 720+, our loyal audience is coming to us because they are self directed, web savvy individuals that are in-market, in the final stage of their search and ready to transact.
The current mortgage and financial markets are driving a record number of in-market mortgage and home equity prospects to the Bankrate web site. A listing on Bankrate’s mortgage rate tables will enable you to capitalize on this tremendous influx of in-market mortgage consumers.
You can manage your rate table listing directly from your computer:
* YOU update your products and rates – up to 6 x’s / day
* YOU determine the amount you would like to spend per day/week/month
* YOU decide when you want your listing to be “live” and when to pause it (on weekends, if you’re out of the office, etc.)
Your listing can be “live” within 48 hours of deciding to place your product(s) on Bankrate.com. Take advantage of the tremendous consumer interest in the mortgage market right now!
Since there are no set up fees or contracts, you have the perfect opportunity to test the water and find out first hand how we will WORK for YOU!
If you are interested in listing your company on our Mortgage Rate Tables and would like to receive more information about our CPC (Cost Per Click) advertising program, feel free to either call or email me.
After reading this email, I hope you’re beginning to see the light. Millions of people every day use Bankrate.com and similar websites to research VA mortgage rates. They consequently base their buying decisions on paid advertisements designed to bring in customers. And while I am not taking anything away from these sites, I am suggesting that what you see is NOT what you get.
Cost also affects quoted VA interest rates.
If I told you my company offers 30 year fixed rate VA loans at 1% would you believe me? You should, it’s absolutely true! What I failed to mention is the cost of obtaining such a deal would be outrageous. You would have to make a deal with the Devil and give up your first born! But hey- it’s technically possible.
Finding the truth. (In simple terms) Money is sourced from the same places.
Most financial institutions fund mortgage loans and eventually look to sell them in the secondary markets. The secondary markets “cash out” the lending institutions that in turn allow them to continue funding loans. It’s a continuous cycle. VERY FEW lenders source, fund, and service their own loans. This is another reason why rate shopping is a fruitless endeavor. No matter what name you see on the lobby doors, the money is bought and sold to the same investors. This fact levels the playing field and keeps interest rates very, very similar regardless of the institution.
How to find current mortgage rates for a 30 year fixed rate note.
If you’re looking to rate shop, look no further than the 10-year Treasure Note. This is the principal driving force behind the 30-year fixed rate note. All you need to do is locate the 10-year note and add 2%. As of today the 10-year is 3.125 add ( 2%) and you get 5.125% (today’s 30 year fixed rate) I recommend Bloomberg for this activity.
Track interest rates by yield.
If the yield is down, rates are going up. If the yield is up, rates are going down. Bloomberg also provides an hourly yield change column for at-a-glance calculations.
The key to finding the right VA Lender.
Specialized knowledge and customer service are the two characteristics that separate lenders. Believe me when I tell you there are massive differences. This is where consumers should be focusing their buying efforts. Larger institutions will offer more selection, but have fewer specialized niches. I personally recommend seeking out smaller boutique lenders that focus exclusively on VA loans. Your chances of finding an expert in this arena will be much higher.
After you locate the right lender(s), now is the time to place the call and start interviewing them. Find out about licenses, training, and get a good feel for how they operate. Once you narrow down your prospects to one or two lenders, go ahead and start the application process.
Next, you’ll want to request a written Good Faith Estimate and compare everything. Look at both costs AND interest rates quoted. With VA Loans, make sure the lender calculated escrows. This is an important figure to have especially if you plan on using seller paid closing costs.
By following these simple steps, buyers will dramatically improve their chances of securing the right financing with the best rates. Getting a great mortgage can be complicated, but by staying focused, you’ll avoid the common pitfalls and traps associated with chasing interest rates.