You NEVER get the best rate when you get a no cost loan.
It is a very misleading concept.
There are no fee loans, there are no cost loans.
They are not the same thing. With either of these you are getting a higher rate, which equates to a higher rate and a higher payment for 30 years.
There are retail rates and there are wholesale
rates. Most people pay retail.
I explain this to anyone who wants to listen and give them the choice of the best rates that they might actually qualify for, rather than general rates in the media.
99% of people looking for a loan have no idea where they fall in the matrix of qualifying by FNMA guidelines.
1 point difference in credit score can cost thousands of dollars over the life of a loan.
There may be ways to raise scores quickly, but they aren’t told that because their “friend” doing their loan doesn’t know it either.
There is also the option of getting the lowest (wholesale) rate possible, and paying for the costs, which results in the lowest rate and lowest payment possible for the life of the loan.
It generally takes 3-4 years to come out ahead, then you are saving for the balance of 30 years.
Many people want to assume that they will just get a free loan and refi if rates drop.
They are now stuck in a higher rate loan or an ARM that is going to explode, AND UNABLE TO REFI.
Never before in history have such a large % of “homeowners” been unable to refinance.
They no longer qualify for a loan, at ANY rate.
With rates now just above historical lows, I think it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.
They don’t know if they will qualify.
Banks will tell you that they have no fees. It’s a lie. The fact is that the rate that they quote you (retail)is higher to compensate for fees. It’s simply a retail rate.
In general, you have clueless consumers (who think they understand loans) going to clueless salespeople (who think they understand finances & loans) for the largest financial transaction of their lives. Neither one seem to want to learn what they don’t know.
This is a recipe for disaster resulting in the simple fact that 99% of borrowers did not get the best loan that they could have on the day that they chose to lock.
Higher retail rates may not change as often as wholesale rates which can change at any time.
This morning’s opening rates for 30 YR fixed are well off the lows of several days ago. What was 5.00% is now 5.25 They could end the day higher or lower. Right now, by paying an additional .75%, the rate is 4.875% saving .50% HLS
