What is the best interest rate?

This is the first question that most people would ask, right?  After all, the interest rate can make the difference of thousands of dollars over the life of the loan.  Besides that, every advertisement that we see and hear is touting that their company has lower interest rates than every other lender.  But is the lowest interest rate always the BEST DEAL? The answer is absolutely NOT!

Surprised?  I'll explain.  Lenders make money two ways:  They make money with the interest rate that they charge AND they also make money by charging fees.  A lender with higher fees can give a lower interest rate because you are paying more up front.  A lender with lower fees will likely charge a higher interest rate.  In other words the relation between rate and fees works like a see-saw...when one goes up, the other goes down.  

The more money you pay to get the lower rate, the longer it takes to recover the cost of obtaining that lower rate.  In simple terms if you pay an extra $1500 in fees and your monthly savings is only $15 per month, it will take you 100 months, or 8.3 years just to recover your initial payout.  Will you even own the home for 8 years?  If not, then you just threw money down the drain.

Here's the kicker...the VA restricts the types of fees that a VA buyer is allowed to pay.  So if your lender is charging high fees, you may have to negotiate for the seller to pay these items.  That's not so bad, right?  WRONG...a seller looks at their bottom line number when they are considering a buyer's offer, so chances are they will not negotiate as much on the price if they have to pay a bunch of extra fees.  Even worse, if there is a competing offer on the home you want, the seller may accept the other offer instead of yours.

If you compare lenders by simply comparing interest rates from one lender to the next, you will not be comparing apples to apples.  The key is to find a mortgage loan officer you can trust to structure a loan for you that best fits your needs.

Stay tuned to my blog, I will explain in detail the best tips for you to compare lenders to be sure that you get the BEST DEAL!