beware of RATE GAME

The first thing to do when you need a mortgage is to ask about the rates, right"

The first thing you do is tell the salesman or licensed Loan officer what you are trying to accomplish with this mortgage and how is the best way to get there. So you ask about "programs." Which one works best? Probably the good, old 30-year fixed -- right? Probably not. That works best only if you are going to be in that particular 30-year loan for 30 years. The mortgage history in California say that's doesn't happen too often in these days when most of us use our home as a powerful financial tool. So you might look at shorter fixed terms with a lower rate, if you think you might move, refinance into a better rate , get some cash out, etc.

If you can afford the higher payments on a lower-rate 15-year mortgage, is it worth saving a couple of hundred thousand dollars? How often are you going to be able to buy a six or seven figure item and save maybe gwo or three hundred thousand dollars?

If you need cash-flow to be maxed out, there are minimum payment programs that accomplish that, too. But that is a story within itself. Just remember "Option ARM" or "Pick 'n' Pay".

Okay, now you have the program. What about the rate and monthly payment? THE ONLY THING THAT REALLAY COUNTS IS WHEN AND HOW YOU LOCK THE LOAN. No matter what "quote" you get today IT IS ONLY TODAYS' RATE. It is a straw in the wind. RATES CHANGE DAILY, that's why you hear about "rate sheets." So what anyone tells you today, has little to do with the rate you will be able to get. It's sales talk, and more often than not, HYPE.

The mortgage sales rep gets only one shot at you, so he learns some tricks to try to make it happen. One is the good ,old "Bait and Switch." He gives you a spectacular rate, never telling yoiu that you need a spectacular credit score to qualify. And then he tells you: "sorry, you can't qualify for that program, but the good news is that we can qualify you for another program. Rate is a lot higher, but at least you get a loan." This is three weeks into the processing, and he's betting you won't want to start all over again. And, even if you do go to another company to restart the process, he can figure "nothing ventured, nothing gained."

A better and more widespread technique is the "Shell Game." You get a rate quoted well below the lowest rate at that time. If the rates do happen to go down and can be locked in at a later date, the pea is under the shell, and he wins; he is a GREAT guy. But he's playing with your money. And if the rate doesn't come down -- or even goes up, he says "take it or leave it. Can I help it rates went up?" Chances again are he'll keep your loan since you don't want to go to another company especially since he tells you rates are on their way up. And if you don't buy into that, what can you do about it? Shoot him? Turn him in? To whom? The industry works on paperwork not verbal quotes. So he's not a GREAT guy. He's an SOB.

But the best of them all is the POINTS game. The first thing to know about points is that the one and only reason they exist is to raise or lower rates and closing costs. Take a point, and you get a lower rate -- but pay one percent of the amount of the loan to get that rate. Points are a whole subject in itself, and we will go into it a length if you give us a call or an email. But often an agent will quote you a very low rate and fail to mention that this is the rate with a point. And then there is the "back point. The one percent rebated to the broker, lender or bank. This means the rate will be higher than with no points. So you will be told: no origination points, but fail to mention the rebate points.

And "Honest ABE" -- the dummy who quoted you the real rate and told you that it could go up or down and that you shouldn't take it for anything else than that days' rate-- he can't even get to bat. The more skilled "Honest Abe" will take the time to tell you how it really works -- if you give him the chance to.

So how do you think most commission salesmen are going to fight for your loan in a tight market? Right, you got it. They use the "quote" as a sneaky tool to get your file. They could care less what program you get into as long as it is with them.

Sounds pretty grim, doesn't it? And it's all your fault. Because you asked for a rate quote BEFORE you should have. Or you didn't ask only for the one good reason of getting a feel for the market.

The solution? Get a dialog going with an agent who seems to care about doing best for you. Take the time to listen to him/her. Most of them know their products and when to use them and want to tell you how smart they are. That's the fun of it, the challenge, even: WIN THE GAME. GET THE PERFECT LOAN CLOSED. BUT YOU HAVE TO LISTEN, and not tune them out because you're bored, or don't know what they are talking about. ASK questions.

The next step. Broker, bank or lender? Banks and lenders offer you THEIR programs. Brokers can offer you wholesale rates on any of them; they have no lending ability. They are YOUR agent, not your lender or bank. You have been told brokers are crooks. Truth is that all of them --bank, lender, or broker-- can be lazy, disinterested, or even predatory with little care about your well-being. Some are willing to cut some corners. Most are basicaly honest. Few of them could be called crooks or predatory lenders. It's mostly a matter of techniques, not falsification when it's time for the nitty-gritty: the PAPERWORK. They might call it SALES, but you know better.

One final boost for the beleagured broker. ANYONE WHO TALKS TO YOU FROM A BROKERAGE ABOUT YOUR LOAN IS A LICENSED LOAN OFFICER. This is not a requirement for sales personnel with banks and lenders.

MORAL: Don't "chase rates" unless you are a masochist. Find a company and Loan Officer you feel you can work with and don't try to hustle them for a special "deal". THEY CAN ONLY GIVE YOU WHAT IS AVAILABLE. THEY HAVE NOTHING WHATSOEVER TO DO WITH SETTING RATES. THEY CAN'T GIVE YOU THAT "DEAL" YOU'RE LOOKING FOR.

FILL 0UT OUR APPLICATION. THE ONLY DEAL WE HAVE IS A SQUARE DEAL AND THAT'S WHY WE ARE STILL DOING LOANS FOR CLIENTS WE HAD 10 YEARS AGO.

American Family Loan Corporation - 2021 Business Center Drive (105) - Irvine, CA 92612
Office Phone: 949-333-3838 Fax: 949-333-3880

We lend in the following states: CA, HI,FL, CO, NE, AZ, OR, MA

DON'T PLAY THE RATE "GAME." YOU'LL LOSE