by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Here is a sampling of mortgage offerings on Bankrate.com. (for July 11, 2007)
I chose a $252,000 loan for a $315,000 purchase price in Phoenix. Income and assets need to be verified. Credit score of at least 620. I assume a 1% origination fee and about $1200 in APR loan costs. I would have priced that loan on July 11, 2007 at 6.5% with an annual percentage rate of 6.679%.
Take a look at the variances on Bankrate.com . Can you see the stupid mortgage banker tricks that can be played? The lower rate offerings are stacked with APR fees. In reality, those “fees” are truly discount points but the advertisers know that the consumer eschews the term “points”.
Bank of America and Countrywide have been advertising “No Closing Cost” loans on television. So, why does B of A reference their no closing costs loan but quote a rate with .537 discount point and $1155 in APR fees? It’s the rate, stupid! Mortgage shoppers won’t call if they published the rate of over 7% for their “no closing cost” loan.
Confused? Bankrate.com would be better serve a consumer if they isolated a rate for a specific loan offering and insisted that the advertisers compete on fees. Then, rank those advertisers from lowest fees to highest fees.
That’s assuming that mortgages are a commodity. Even Bankrate.com knows that just ain’t true.
Rhonda Porter says:
“Bankrate.com would be better serve a consumer if they isolated a rate for a specific loan offering and insisted that the advertisers compete on fees.” Brilliant and such a simple idea…now if only the LO had to guarantee the closing costs as well.
July 14, 2007 — 6:46 am
Jeff Belonger says:
Brian…. this is the part of shopping that I dislike. Yes, it can be good if the client shops. But here is a great example on how shopping might hurt you.
By stating what you have mentioned here, the consumer should search out referrals from those that they trust. This could sometimes be a better solution.
Thanks for bringing this to everyone’s attention. jeff
July 18, 2007 — 12:46 pm