First Time Homebuyers - Don't Just Check On The Rate!

There's more to shopping than rate

There are tons of first time homebuyers out there negotiating the best deal on their new home, and now it's time to get a mortgage.

Most of them only know how to ask one question:  What's the Rate?

We've been in the mortgage business for over 20 years - and the only thing most people know to ask is - "What's the Rate?" 

While that's a great question, it's kinda' like going into a shoe store and asking if they have any shoes in a size 9.  Just shopping the rate is not necessarily going to get you the best price.

And what is the best price anyway!?!  Most of the clients that call us speak to my husband, Steve.  The first thing he ALWAYS says is, "hey, thanks for calling!  So you were referred to us by (insert name of friend, co-worker, agent, builder)?  That's great!  Rate is not the only question to ask

So, tell me a little bit about what you're trying to do."

I share an office with him - and after listening to him say this for like the 90th time I turned and looked at him saying, "THEY WANT TO BUY A FREAKIN" HOUSE!"  He wasn't amused.... but once calmed down he explained to me why he askes that question, that way (and why it will help you when shopping for a loan).

Most clients answer the question of what they are trying to do one of these ways...

Each of these items will help the loan officer determine which mortgage program (like those different kinds of shoes) will work for you!  The PROGRAM will then help us get to a mortgage interest rate... and knowing your credit score and how much money you want to part with for closing costs will determine your rate.

How Long Will You Be Living There?So let's assume you figured out which program you are going to use to finance your home - YIPPEE!  One more step in the process!  Now you can just call loan officers and ask for their rate on that program and those terms with your credit and compare - it's not even that easy!

You want to be certain that you are working with an experienced loan officer.  The largest fianancial transaction of your life is far too important to place into the hands of someone who is not capable of doing more than just quoting you a rate.

So here are some other questions for your loan officer:

What's the next Economic Report coming out that might effect the direction of Mortgage Interest Rates?  A seasoned loan officer will have this information at their finger tips, and will know, for instance, that the FED says it will slowly stop purchasing Mortgage Backed Securities, which could cause rates to go up...

When Bernanke and the Fed "change rates," what does this mean... and what impact does this have on mortgage interest rates?  The answer is not obvious.  The Fed has some impact over SHORT TERM rates, like those on your credit cards, however very little actions the Fed takes (especially recently) has created a lower movement of Mortgage Bonds.  Because of the "bad name" associated with Mortgage Bonds in the SubPrime market, fewer people are purchasing these bonds... That's why it's important to note that the Fed says it will slowly stop purchasing Mortgage Backed Securities (If you have other questions about this just call us!)

Once you believe that you are working with a seasoned loan officer, there are other points to consider... If You Get What You Pay For!you talk to 3 lenders who all tell you the rates are at 5.25% and you talk to another person who says they are at 5%... well, you've got to question what that lower priced lender is doing.  For the most part, rates are rates.  The cost of money is pretty close to even across the board - so, if it sounds too good to be true, it probably is. There could be extra fees, or they could be quoting a rate that is only good for the next 12 days.

You get what you pay for!  If you are looking for the cheapest deal out there, understand that you are placing a highly important process into the hands of the lowest bidder. (If you've ever had a cheap haircolor job or a cheap haircut, cheap pair of shoes that KILLED your feet or fell apart  - you know what I mean). 

All too often, you don't know until it's too late that the cheapest isn't BEST.  Remember that missed closing dates in NC can now mean a FINE to the buyer.  Most "internet companies" do not operate in the State of North Carolina and do not know our laws - or even how we close loans. 

If someone mentions closing at the Title Company - you know you're dealing with someone who's not from here, and some delays and differences in quoted closing costs and actual closing costs will likely occur.

Understand that Interest Rates and Closing Costs go Hand in Hand.  When someone asks me for a rate - I ask them which one they want.  I'm not being sarcastic (well, okay maybe a little) but we have interest rates from 2% to 10%.  It depends on the program and the amount of money you want to pay out of your pocket. 

Many first time homebuyers want the smallest amount of closing costs (so they can buy a hot new leather sofa!) and will therefore take a slightly higher interest rate - so that the lender pays the closing costs.  A professional lender will be able to offer the bst advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

So our advice is to be smart.  Ask questions... but don't just ask what the rate is! 

Call Steve and Eleanor Thorne with First Financial Services in Cary, NC. Call us at 919-649-5058.  We've been mortgage Lenders in North Carolina with the best mortgage rates for decades!


Comment balloon 26 commentsEleanor Thorne • September 14 2009 04:30PM


Eleanor, what a great recap for buyers!  I love your analogy!!  Very well done!!!

Posted by Lee & Pamela St. Peter, Making Connections to Success in Real Estate (Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522) almost 10 years ago

Nice blog!  Great information for Buyers and I'm also lovin' the green polka dotted shoes!  Can I get those in a size 8?

Posted by Amy Hahn, Realtor/Broker - Crystal Coast, NC (Pine Knoll Shores Realty) almost 10 years ago

Hey Amy!  I'm digging those green polka dot shoes too!  Thanks!

Pam - I liked this analogy - post is probably too long, but it's important info!

Posted by Eleanor Thorne, Equity Resources 919-649-5058 (Equity Resources) almost 10 years ago

Wow, this is an great post, E. You really have covered a lot of valuable information for buyers.

I recommended you for a Feature and reblogged this. We'll see if the AR gods are off playing with lightning bolts or reading posts......they should be reading this one!!

Posted by Bonnie & Terry Westbrook, Grand Rapids MI Real Estate (Westbrook Realty) almost 10 years ago

Eleanor.. there are many things buyers should consider. What a great list of things here

Posted by Roland Woodworth, Q Realty - Power In Real Estate (Q Realty) almost 10 years ago

Wow! Missing a closing date in NC can result in a fine to the buyer? Sounds like a great policy to me!

Posted by Vickie Nagy, Vickie Jean the Palm Springs Condo Queen (Coldwell Banker Residential Real Estate) almost 10 years ago

I'm diggin' the idea of the fine ... I have too many buyers draggin' their feet at times!  A little "stimulus" is warranted sometimes.

Lots of info contained in this that is important and interesting, but nothing more important than the one contained in the title itself.  There IS more to it than just the rate ....

Great piece ...  Thanks for conveying a much needed message.


Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) almost 10 years ago

Great post. I can see how your husbands question can start a conversation, giving him more insight into their needs.

Posted by Vanna Siackhasone, Anchorage Real Estate 907-720-4663 (Real Estate Brokers of Alaska 907-720-4663) almost 10 years ago

Good post...even better review of the thoughts of the buyer as they approach their lender. Thanks

Posted by Rob Rieder (Karin Kay Properties) almost 10 years ago


And if you hear someone say something about "opening escrow," they just might not be from around here.

Good blog!

Posted by Mike Jaquish, 919-880-2769 Cary, NC, Real Estate (Realty Arts) almost 10 years ago

Eleanor, great post, lot of good info for homebuyers I'm going to re post it.

Congrats on the feature.

Posted by David O'Doherty, Clayton NC Homes, Raleigh, NC (Raleigh Realty Inc) almost 10 years ago

Eleanor, wonderfully presented! Don't pick your lender based on nothing more than the rate and don't pick your agent based on nothing more than who will take it at your price!

Posted by SarahGray Lamm, Realtor - 100K Hours of NC Real Estate Experience (Allen Tate Realtors Chapel Hill, NC 919-819-8199 ) almost 10 years ago

Eleanor - excellent post, buyers ask about about rates a lot too, and the lowest rate. We've reblogged your post so our readers can learn from it as well. Thank you!

Posted by Monica Bourgeau, Business Coaching (New Phase Business Coaching) almost 10 years ago

Very true. Buyers need to understand that it's not just about the rate and I completely agree that you should never shop on rate alone. The client needs to see the total costs of the loan.

Posted by Home Loan Search.Online (Home Loan Search Online) almost 10 years ago

Outstanding Eleanor!  Buyers don't always understand every thing involved in selecting the right program and most advantageous terms for their situation - until we educate them.

Posted by Jane Penttinen, NMLS #222178 (V.I.P. Mortgage ) almost 10 years ago

I agree completely. There are so many things that go into it that many folks don't understand. They have been conditioned to ask for rate. We must condition them another way.

Posted by Nicholas Goraczkowski, Your Mortgage Resource - (720) 83-RATES almost 10 years ago

This is a great post and you are right the frist thing out of their mouth is what is the rate almost like nothing else matters I have one client who is shopping all over the place for an 1/8 better, Sigh

Posted by Gene perez (Greater Mortgage Solutions & Valley Hills Realty ) almost 10 years ago

Great post Eleanor. I think that as loan officers we have a responsibility to help buyers get the mortgage which best serves them and moves them to towards their long term financial goals. Just getting the lowest rate doesn't cut it. It certainly bypasses the question of what costs them the least for the amount of time they plan to be in the home.




Posted by Simon Smart (Sunstreet Mortgage, Arizona) almost 10 years ago

Great post. I try to explain to my clients the overall picture, but in the end it is really up to the loan officer.

Posted by Rashel Beaver almost 10 years ago

  Hi Eleanor,  Great point about: "You get what you pay for!" and putting you mortgage in the hands of the cheapest bidder.  If they're working for peanuts are they really going to be excited about putting the time into your deal?...of course they should be!...but are they really going to be?...especially when they have other deals that they are getting a fair wage for working on. 

Mortgages have so many moving parts with title issues, escrows issues, appraisal issues, contract issues, etc., not to mention the mortgage stuff (qualifiers & disqualifiers, special guidelines, what underwriters want to see & what they don't, lock timelines, disclosures/docs/compliance, etc.).  An experienced loan officer catches these issues before they create problems and deals with challenging "surprises" as part of his/her typical business day.  It seems like every month I close at least 1 deal from a borrower who had an impossibly low offer fall out somewhere else first or just linger and never close somewhere else.  Unfortunately, they had to learn the lesson of your blog the hard way.

Posted by Tyrone Baker, Mortgage, Home Loans almost 10 years ago

Thanks for the informative post today,


Posted by Patricia Aulson, Realtor - Portsmouth NH Homes-Hampton NH Homes (BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate ) almost 10 years ago

Hey!  Thanks everybody... this is cool!

Posted by Eleanor Thorne, Equity Resources 919-649-5058 (Equity Resources) almost 10 years ago

You are right Eleanor!  There is SO MUCH that goes into this - great post and very informative for the consumer!

Posted by Emily Lowe, Nashville TN Realtor (The Lipman Group | Sotheby's International Realty) almost 10 years ago

Okay, Elanor...YOU GOT ME!!!

when you asked: 

"What's the next Economic Report coming out that might effect the direction of Mortgage Interest Rates?" 

My first thought was jobs...even though I was familiar with the report you referred to about the FED not purchasing MBS in the future.

Great stuff...I've done this for a while, but learned a lot from your post.

Keep it coming!


Albert Arouh

City 1st Mortgage Bank



Posted by Albert Arouh (City 1st Mortgage Bank) almost 10 years ago

Great Post!  I think it is important for REALTORS to review the good faith estimates with their clients.  I believe that every lender deserves to make a fair profit.....I don't believe that they should make it all off of one client though.  I recently reviewed a good faith estimate that was charging 1 point origination, 2 "discount points" another .75 in junk fees and a 6.5 rate. After a one minute discussion with the lender all of a sudden we were down to 1 point  origination, .5 in junk fees and 5.25 interest rates.  This lender was trying to take advantage of an uneducated buyer in my opinion.  This is a rarity and most lenders are quality people.  We all deserve to make a just needs to be reasonable.....again, great post!

Posted by Damon Gettier, Broker/Owner ABRM, GRI, CDPE (Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert) almost 10 years ago

Damon!  Wow!  That's just not possible in NC because of our Preditory Lending Laws!  You are right, having the right lending partner is really important!

Albert - the jobless claims today seem to be moving the market - tomorrow's the biggie!


Posted by Eleanor Thorne, Equity Resources 919-649-5058 (Equity Resources) almost 10 years ago