Reports on Home Loans - Introduction

It’s getting just about that crazy … isn’t it? In a market saturated with mortgage lenders, the hype gets cranked up as home loan companies compete for your attention.

You’ve heard the ads: Interest rates starting at 1% – No money down – Pay interest only – We pay all your closing costs – Heck, you don’t even have to pay us back if you don’t want to!

In fact, all of those claims (except the last one) are at least partially true. Just about any program you hear advertised might make sense for you ... or it might be a disaster.

A BRIEF INTERRUPTION BEFORE
CONTINUING WITH THIS REPORT:
Mike has made this special report available to people for years. Recently, Mike has added lending services to his real estate brokerage business. For a quicker way to get the information you need to become a savvy home loan shopper ... see this special offer.

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written by Mike if you prefer.

So, I want to do two things for you:

I want to make the point, as forcefully as possible, that lenders often make claims that sound too good to be true to lure you into calling them, and
I wanted to give you some pointers that cut through all the hype and help shop for a fair deal on your home loan.

Regarding the first point, lenders are very savvy marketers. They know which lures to dangle in front of you. And, the most frequent lure is usually some nonsense about an incredibly low interest rate or the promise of a special loan program that is available for a limited time.

For example, when 30-year fixed interest rates were at 7.75% a few years ago, a client called excitedly to tell me about a "special loan program" he had found advertised in the paper. He faxed a copy of the ad that had the following headline "30-Year Loans at Only 7%".

I called the lender and was told that this was, in fact, a 30-year loan with a rate of just 7%. One little additional detail -- the 7% rate was only good for the first three years on this 30-year loan! After that, the loan would become an adjustable rate mortgage and adjust to the market interest rate each year.

Look -- every lender out there has a similar program. It is a very common program called a 3/1 hybrid loan with the rate initially fixed for three years. At the end of three years, the loan converts to a one-year, adjustable rate mortgage.

Also, the 7% rate this particular lender was offering was not very competitive with those available from other lenders on the exact same loan program.

But, this lender was just trying to make the phone ring. The lender knew that people would see the headline and assume that this was a 30-year loan where the rate was fixed at the very low 7% rate for the whole 30 years.

These deceptive techniques drive me crazy. How can you trust someone who sucks you in with a gimmick? Do you really want to deal with a person who starts off your relationship by deceiving you?

I know you want to get the lowest interest rate you can on a loan. But, it's hard to shop for interest rates. Here is why.

In any market, it really makes sense to pick a lender and get pre-approved for a loan while you are in the process of looking for a house. Having a loan approved puts you in a much stronger negotiating position when you do find a house you want to buy.

But, you can't lock in an interest rate until you've found a house. So, when you are "shopping" for a lender, you can't really select one based on the rate they are offering. Rates change every day and most lenders will not let you lock in a rate until you have located a house that you want to purchase.

When lenders get a call from someone who is "shopping around", they know that person is not going to be locking in a rate on that day. As a result, they might quote an unrealistically low rate to get you in the door knowing that you will not lock in a rate for many days or weeks. They know they will have a chance to bump you up to market rate or above before the loan closes.

I have several buyer clients who experienced this first hand each year. These buyers have met lenders and started loan applications before they meet me. When they found houses and they are ready to lock in their interest rate, they are quoted rates that were actually above the true market rates at that time.

The most recent, and most shameful, example of this happened to a couple in their 70s where the husband was in the beginning stages of Alzheimer's disease. As their new home neared completion, I called their lender (a lender they had picked because the lender offered to charge a lower than normal loan origination fee to help them "save money") to find out what rate they could obtain on a 15-year, fixed rate loan. I was told 7.75%.

That was very high for the market at the time. I called two other loan officers in other branches of this same large lending institution. I was told the rate that day was at 7.25%!

I also checked my internet sources and they also showed rates in the 7.125% to 7.25% range as did another local lender I frequently use. I followed this situation for two or three days just to make sure my client's loan officer had not just made an innocent mistake. But, it was the same pattern every day -- she was always at least 0.5% higher than the real market!

When I finally confronted the loan officer about this, she was angry. Can you believe that? She was caught red-handed trying to gouge these nice, senior citizens and she was not even apologetic or remorseful. Eventually, the lender reduced the rate to the fair market level even thought she claimed she was "losing money just because she did not want to have an unhappy client".

This kind of crap (pardon me, I really wanted to use a stronger word) goes on all the time.

But here is the good news. While there is no whiz-bang, special deal to be had, you can do things to insure that you get a loan at a competitive interest rate. You can get a fair rate and make sure that you are not taken advantage of.

I'd like to help you with your shopping for a home loan. So, I have two special reports that will help you in this regard:

Home Loan Options: This report explains the various types of loans that you might obtain and gives some guidelines for deciding which type of loan is best for you.
Finding a Competitive Interest Rate: Explains how to shop around for the best interest rate for the type of loan you have selected.

These reports are part of my Seven Insights on Real Estate^(TM) series. Just as an interest rate of 7% will double your money in ten years, a Seven Insights report is designed to to double you knowledge about a variety of real estate topics by providing seven critical insights that can be learned in just ten minutes.

Simply click here to request these helpful reports and they will be delivered to you immediately via email.