.: Pacific Residential Mortgage

In order to know you are getting the best deal on your interest rate and costs, you need to understand how interest rates & costs work. Many lenders will intentionally try to confuse you on this subject. Some loan officers don’t really understand how interest rates and costs work, so they can’t explain it to you well. Either way, you don’t have the right company to get the best rate and lowest costs for your situation.

We will be covering interest rates, points, closing costs, pre-paids, locking and more, in detail. While a web site can provide you lots of information about how things work, you still need the help of an experienced loan officer to truly understand the entire process with all it’s nuances and get the best loan for you.

When you use an experienced loan officer from Pacific Residential Mortgage, LLC, you’ll know you are getting the loan you want, at the rate & costs you expect, saving money & time over going direct to banks or credit unions yourself. Read the rest of this web page to understand why.

Rate Graph

This chart is to show you two things. One, the average rates over the last 20+ years so you can see some trends and how rates have moved during different historical economic periods. Two, so you can see the Federal Reserve and it’s Federal Funds rate all over the news constantly, has little impact on mortgage rates.

Mortgage rates move up and down with long term inflation fears on a global scale. If fears of future inflation are going up, mortgage rates will increase. If fears of future inflation are under control and inflation may even be decreasing, mortgage rates will drop accordingly. On a global scale inflation has gotten better over the last 20 years and long term interest rates, such as 30 year fixed rate mortgages, have dropped overall as you can see. If you look at the years of the bumps in the mortgage rates on the above chart, you can tie that period to a time when the economy had higher inflation fears.

When the Fed raises or lowers the Federal Funds rate, they are usually trying to control the U.S. economy by watching inflation indicators. If you were to look at the above data on a detailed scale, you’d see that normally the Fed lags the long term rate markets with a rate direction, the opposite of controlling it.

Your best choice on deciding when to get a mortgage based on rate, is to get a mortgage when you need to. Then get the best rate you can. Trying to time the market on rate predictions in the future is just guessing.

Locking the interest rate is important to understand. Knowing when you should lock in the interest rate can either save you, or cost you, a lot of money over the life of the loan. Most mortgage loans require a known closing date and an accepted offer on a purchase to be able to lock the rate. There are some “Lock & Shop” rates out there where you “lock” the interest rate, then buy a house, but they are at higher rates and have other problems. The loan officer you chose helps advise you on this. Again, choose your loan officer wisely. Make sure of the "Lock In" time in days, and the associated costs of the interest rate you locking.

Annual Percentage Rate (APR) is a Truth-In-Lending-Act (TILA) requirement, Regulation Z. This is regulated by the Federal Reserve Board of the government. It represents the total cost of borrowing as an annual basis over the term of the loan. In layman terms, the difference between the interest rate and the APR on a fixed rate loan, represents the other costs spread over the term of the loan on an annual basis. As an example, if your interest rate is 5.875% and the APR is 6.096%, the difference is 0.221% which represents the costs as a percentage rate, over the time period of the loan. Mortgage insurance is also part of the APR calculation. ARM loans get complicated with APR. You need to understand how ARM loans work to understand the APR. An experienced loan officer can explain ARM APR to you in person but it would be difficult here on a web page.

The APR was designed by the government in 1972 and amended many times since, to be a shopping tool for the consumer. However due to the complexities of how it is calculated, many loan officers do not figure it correctly or figure it incorrectly on purpose to be lower than the next lender. Also not all of the costs of borrowing are included in APR by law. Some things like what day of the month you close on or how much you put down, effect APR. If you close near the end of the month, or put 15% down instead of 5% down, your APR calculation with be lower. Your costs and principle & interest payments aren’t lower but the APR is ??? You can see why it is not a good shopping tool. The Federal Reserve Board, Congress, HUD, NAMB, MBA and others are making recommendations to change how APR, GFE and other disclosures are done to make better tools for the consumer.

Everyone wants to get the best interest rate & lowest costs on their mortgage loan. Everyone. What most don't realize is they should be shopping for the best "value" overall in rates and costs. Just "lowest rate" or "no points" is not the answer to saving the most money. Even worse, many choose the “lowest payment” not understanding what kind of ARM loan they put themselves into and lose their home when the payment increases. Also, the lowest rate or costs many times means you've been lied to with a Bait & Switch offer.

Any offer that sounds too good to be true, probably is. Mortgages are a very competitive business and unscrupulous loan officers don’t mind lying, even putting it “in writing on a GFE”, to get your business. When the Costs are $2000 more or the Rate is .25% higher than you were quoted originally, and now you’re at escrow signing your final loan papers two days before close, it is too late. You’re stuck in order to close on time. You did not choose the person and company to help you wisely. Remember you are looking for a loan on probably your most important asset, your home. Take the time to do it right.

Large "club" type discount stores are a great place to get breakfast cereals, soda or other groceries cheap, but do you want to get financial advice from them? While home loans are not rocket science, they are too complicated to get your advice on loan types and interest rates from anyone but a true professional.

The Internet or newspapers are great places to get information about loans but do you really believe you will get the loan rate promised when after looking at hundreds of rates, you choose the lowest one? If so, you probably also believe the diet pills on TV work as advertised.
Another highly advertised approach is from companies that promise you 3, 4 or 5 different competing mortgage offers from the minimal information they collect on you. These are just lead generation companies that advertise to the public on radio, TV and the internet, and sell the information the consumer gives them, to mortgage brokers and banks. The mortgage brokers and banks PAY for these “leads” from the lead generation company regardless if they close the loan or not. Who do you think really ends up paying for these extra costs? You do. Plus there is no guarantee you won’t be Bait & Switched anyway as all 3-5 of the lenders giving you those “offers” know you are getting “competing offers” from 3-5 others as well. What do you think they are going to quote? They just want to suck you in, and they’ll deal with reality later with excuses and re-disclosures at signing, as you will.

A lot of advertised interest rates are at 10 day lock ins (or plain lies) and impossible to get anyway as you could never close the loan that fast. You don’t end up at close with the original low interest rate promised at application. They make up excuses like "The lock expired before we were ready" or "The lender we locked with turned you down but this other lender approved you" or even worse they didn’t lock in your loan, or even tell you it was an option to lock in. Some tell you there is a fee to lock in to talk you out of locking in. Some try to talk you out of locking when you want to. If you don’t lock in at their below market quote (Which they won’t do) then you are at their mercy when you do lock 2-4 weeks into the loan process. Then once your loan is approved and ready for signing, they lock you in at a higher interest rate. Standard Bait & Switch practice.

Getting a referral from a relative, co-worker or friend of a good mortgage loan officer they have used is the best bet. This is how we get most of our business at Pacific Residential Mortgage, LLC. Repeat customers and referrals from them.

Some mortgage loan officers harm their customers unintentionally with their "zest" to save the last nickel in fees for their customers. They lock your loan with a lender that is a few hundred dollars cheaper on fees that day than every other lender in the country. Then that lender continually delays your loan with asking for additional conditions multiple times. Sometimes delaying your closing and expiring your lock. What have you saved if the loan doesn’t close? (Read an article from The Oregonian dated 08/24/2003 about Capital Commerce). They went out of business leaving many borrowers with locked & approved loans that did not fund at all (people that had to pay higher rates to get their loans and/or close 3-4 weeks later).

Another example, the loan officer chooses the absolute cheapest appraiser on your loan. Usually the cheapest appraisers are the slowest and do poor work that lenders don't accept or the underwriter keeps asking for additional information from the loan officer about the appraisal. Sometimes you end up having to get a 2nd appraisal which costs more and causes delays. Now what have you saved? And you didn’t even have a say in picking the appraiser, your loan officer did.

It's hard to compare "apples to apples" in rates, costs or service. You pick your loan officer, they pick the lender they use. You're stuck with their choice in service. You have to trust your loan officer to get you a good deal, while at the same time going through a lender that will close the loan in a timely fashion without problems. Not to mention one that will approve the loan and not deny it 4-6 weeks into the process after rates have gone up and you can't go anywhere else. Are you sure your loan officer has the expertise and won't mess up your loan unintentionally, but messed up all the same?

You need to pick your loan officer wisely the first time. Choose an experienced loan officer from Pacific Residential Mortgage, LLC, and know you are getting a great rate and costs combination for your home loan.