This may seem like a really bad deal but most economists believe that a healthy economy should have a working interest rate of somewhere between 7 and 8.5%. If were buying a house in the early eighties you would have given your right arm for an interest rate in the 8’s because many of us were paying 12 to16% in that rough economy. As much as I don’t want any of us to go back there I do think it is important to put things into perspective and realize that our economy will not grow unless rates eventually go up to a healthy place. Investors don’t want to invest if they can’t make money so eventually, it has to be a win, win for everyone.

Once again I had a potential customer who decided to go with another company who got them a rate that was .250% below what anyone else was quoting and it looked like a great deal from the original GFE that they were given.  Then, about a week after they closed the refinance loan, the wife started to put two and two together and realized the balance they refinanced was really high.  She pulled out the paperwork and saw over $9,000 in fees and wondered if that was right.  After pulling out the Good Faith Estimates she had received from a couple of other companies, I got a phone call.

It wasn’t good news that was delivered and there was nothing they could do about it now.  They DID get the rate and they DID pay for it.  You must understand the rate is not always the most important thing to consider on your loan; the overall cost is.  Make sure you get with your loan officer and he or she explains thoroughly how much your loan will cost you in terms of time of ownership vs. money saved by rate.  It is very easy to pay more money for a lower rate and never make up the difference.  You are responsible to ask the right questions and know what you are signing and not to fall for the smoke and mirrors.

I was not interested in going to one of the “big guys” as they are the ones who have been most affected by the mortgage back security mess more than some of the smaller banks.  Mortgage companies who are trying to sell mortgage back securities in order to maintain their business models are having a tough time as well finding investors to purchase this paper and seem to be struggling.  What that leaves are the smaller local and regional banks that have the flexibility to sell their mortgage paper or portfolio them within the bank.  It seems smart to me to go with the most flexibility right now.

The bottom line for borrowers is getting the loan they need at a good competitive rate.  New South Federal definitely has this in their favor.  In the end it’s my clients that ultimately win and if they win, I win.