Mortgage rates today won’t matter tomorrow. This is very important to understand so let’s look at it carefully.
Do you know what the #1 mistake home buyers make when it comes to a mortgage? They shop for rates. This is a colossal mistake and often costs home buyers thousands of dollars. It can also cost you heartache when you choose a banker who can’t close on time or makes the process a misery.
Mortgage Rates – The #1 Mistake
Buying a home in Bergen County takes a good bit of time.
The contract is sent to the attorneys once it’s signed by the seller. This begins the Attorney Review process. No one processes a mortgage then. Why? Because it doesn’t make sense. Would you process a mortgage without a firm, binding contract on a house? Attorney Review creates that final contract. So you wait for Attorney Review to end. Next comes the home inspections.
Figure 3 weeks of time to schedule, inspect and conclude inspection issue negotiations. Buyers wait until this is finished to be sure they will still buy the house. We are now 1 month past the day the contract was signed. This is when the mortgage really gets processed.
Assuming you had a pre-approval, some work has already been done. Consequently it only takes a few more weeks to get the mortgage commitment. All of this totals 7 weeks. Because almost all mortgages do not allow rates to be locked in without a commitment, you can’t do this for 7 weeks.
So why does an interest rate from 7 weeks ago matter today? It doesn’t. This is why I tell my home shopping buyers that mortgage rates today don’t matter tomorrow. Yet every buyer stays focused on mortgage rates. This is the #1 mistake they make with their mortgage.
Why Do Home Buyers Focus On Interest Rates?
Why do home buyers focus on interest rates? Because they are taught to do so by powerful forces. The mortgage industry markets itself through interest rates and how easy it is to get a mortgage. The main emphasis is overwhelmingly on rates. You are taught to compare banks by the rates they quote. So you do. However this is wrong because it’s never accurate.
Rates quoted in ads differ because banks include varying degrees of processing fees. One bank including all fees will have a higher rate than another bank eliminating some or all fees in their rate. Here’s something else – rates fluctuate all day. So if one bank quotes a rate from 10 am and another from 2 pm, the rates can be different.
Imagine all the games that can be played depending on what is or isn’t included in the quote. You can’t possibly figure out which bank is best for you by only looking at interest rates.
Your Solution Is The APR
The APR is the annual percentage rate published as a percent. It includes the cost of the mortgage plus fees and other charges. A mortgage rate is only what it costs to borrow the money. So the APR is a much better way to compare what a bank is charging you. It shows you what the mortgage really costs.
Can you see now why banks want you to focus on interest rates? Because rates alone don’t disclose the true cost of a mortgage.
On top of all this, how can you be sure the rate won’t be different when you can lock it in 7 weeks later? You can’t.
When you are house hunting always remember: Mortgage rates today won’t matter tomorrow. Don’t be fooled. If you want to compare rates, use the APR.
If you need the name of a good banker just call or text me at 201-741-8490. There are several I can recommend who are ethical and come from fine banks.