Thanks, Keith!**
From my Realtor’s perspective, credit consumers — specifically, home Buyers looking for a mortgage — place FAR too much emphasis on fees, and WAY too little on service, and the very real financial value of same.
Call it, “missing the forest for the trees.”
So, on average, to originate a $200k mortgage, a top mortgage lender may charge another $500 – $1,000 in fees, maybe.
What does the borrower (“mortgagee,” to be technical) get in return?
These three things:
One. If needed, 24/7 access.
Why does that matter?
When a hot new listing comes on the market just before the 4th of July weekend, good luck getting a hold of that dirt-cheap Internet lender to generate a Pre-Approval Letter, and — if need be — speak to the listing agent about the Buyer’s financial bona fides.
Especially in a super-tight Seller’s markets characterized by rampant multiple offers, that level of service can be — and frequently is — the tiebreaker for Sellers choosing amongst several strong offers.
Two. Interest Rates.
No, no one — with the possible exception of Fed Chair Janet Yellen — can predict the direction of interest rates in the short run.
But, veteran lenders watch the credit markets in real-time, and have a good sense of its ebbs and flows.
Frequently, after a big move in either direction, there’ll be a partial re-tracing, and an attentive lender will contact their clients and recommend appropriate action.
In fact, after the Brexit vote (remember that?), interest rates dived — but not for long.
Sharp borrowers locked in rates before they rebounded, no doubt clued in by their lenders (Note: think the difference between 3.25% and 3.5% is trivial? On a 30-year, $200k mortgage, the 3.5% mortgage costs another $10,000-plus in interest).
Three. Appraisal.
True, the risk of a low appraisal in a rising market is small.
And, if a property fails to appraise, the sales price is typically renegotiated at a lower price.
But, Buyers getting financing face another risk associated with appraisals: that their lender will drop the ball, and they’ll miss the deadline for getting what’s called “the Written Statement” to the Seller.
Do that, and the deal’s off.
Bottom line?
A great lender will cover their fee by a factor of 2X (or 4X!) . . .
**That would be Edina Mortgage’s Keith O’Brien, who did all of the things discussed in this post (and more) for a mutual client earlier this month.
See also, “Why Good Lender Service Matters.”
