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When it comes to understanding what is going on in the mortgage business I always turn to my friend Barry Habib, CEO of the Mortgage Market Guide. This guy knows everything there is to know. And he's been nice enough to share his advice on how to make sure you're hiring a mortgage broker who really knows the business.
Here's the MMG take on giving a potential mortgage broker the once-over: Make 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?
Here are four simple questions your lender must be able to answer correctly. If the lender does not know the answers, run, don't walk. 1. What are mortgage interest rates based on?Answer:
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?Answer:
A professional lender will have at their fingertips a list of upcoming economic reports such as Housing Starts, Employment figures and, Jobless Claims etc…that can affect mortgage interest rates. Don't work with a broker who is clueless about what's going to make rates react in the near future. 3. When Greenspan and the Fed "change rates", what does this mean… and what impact does this have on mortgage interest rates?Answer:
This may surprise you. When the Fed makes a move, they are changing a rate called the "Fed Funds Rate". This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets. 4. What is happening in the market today and what do you see in the near future?Answer:
If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week's newspaper, and probably not a professional with whom to entrust your home mortgage financing.