Most important in your process of purchasing a home is making sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?
1) What are mortgage interest rates based on? (The only correct answer is that rates are based on Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.)
2) What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have an up-to-date calendar of weekly economic reports and events at their fingertips and advice on whether to lock or float.)
3) What does it mean when the Federal Reserve “changes rates”? What impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they can change the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will move in the directions that is opposite of what was intended. This is due to the dynamics within the financial markets in response to inflation).
4) Do you have access to live, real time, mortgage bond quotes? (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to trade based on yesterdays market, had no idea what movement in present time looks likes, and didn’t know what market conditions could cause changes in the near future? No way!)
Buying a house is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but an experienced loan officer does this every single day. Frequently you will see a debate over whether it is better to work with a mortgage broker or directly with a bank. It is much more important to find the right Loan Officer than the right institution, since the better professional will advise you on a proper course of action and guide you through the process with the minimal amount of frustration.