Low PA Interest Rate (APR) Guarantee for your Pennsylvania Mortgage. Lowest Rates.
Straight talk on how and why mortgage companies differ in rates and fees, and how lenders get paid.
Give us the opportunity to match another lender's rate, even if it is lower than ours, and beat their closing costs.
QUESTION: Which is the best offer for someone who is taking a $150,000 30 year loan and plans to stay in the house or mortgage (not refinance) for at least 10 years?
Lender 1 (high fee, low rate lender):
3.5% with $3,100 in loan fees (GFE Box A) plus 1 point
= $673.57 Monthly P&I
Lender 2 (normal fee and normal rate lender):
3.875% with $1,095 in loan fees plus 0 points
= $705.35 Monthly P&I
Lender 3 (low fee, high rate lender):
4.375% with No fees or points
= $748.93 Monthly P&I
ANSWER to which is the best deal:
Lender 1 is artificially lowering their rates by charging you additional points in disguise as fees. Most people never pay more than 1-2 points. You would need to keep that mortgage (not sell the house or refinance) for 12.1 years to make up for paying $4,600 in fees to save $31.78 per month vs. Lender 2. That does not even factor in the economic concept of the opportunity cost for the time value of money. Keeping it simple, the average mortgage is paid off in 7 years. A good loan officer would advise against this high fee-low rate scenario. If you do make it through the long "break-even period", you waste your money on those extra fees. That is why the current industry standard mortgage is 1-2 points in fees for the normal borrower who has no current plans to move.
Lender 2 makes their income off a modest combination of fees plus rate. We believe this is in the borrowers best interest. It financially benefits the vast majority of borrowers.
Lender 3 makes their commission by greatly "upselling" the rate. Thus, while it saves $1,095 in closing costs, will cost the borrower $523 more per year than Lender's 2. Large banks often price their loan like Lender 3. This No Closing Cost Mortgage is only cost effective, and is the best choice, for a borrower who knows they are going to move or refinance in 2 years. As you can see they are paying $523 more per year to save $1,095 in closing costs.
We price our loans like Lender 2 (the correct answer to the quiz) , to benefit the majority of borrowers, though we can change that to beat offers in the other categories if a customers prefers that.
Note: Any lender can offer any of these options. We can get paid by either collecting fees directly from you or by raising the rates above our wholesale cost (upselling). Lender 1 makes their commission off fees you pay them directly at closing.
Lenders who price like Lender 1 are regarded unfavorably in the mortgage community because they tend to flaunt their low rates, and hide their fees. Uneducated borrowers see this low rate, and don't ask questions about the fees or understand that a low rate is not all that matters.
The total cost of a mortgage is a combination of the interest rate plus the finance charges (lender fees). This is how the Annual Percentage Rate (APR) is calculated - which is the total costs of obtaining the loan expressed as a percentage over the life of the loan.
While we can not guarantee other lenders accurately calculate their APR, we will beat their offer as described above, which definitely results in a lower APR.
Please keep in mind we offer a free float down option on most of our programs also, so the best deal you receive from us when you apply can get even better if the market improves before closing.
Please call us at 610 326-2099 if you wish to learn more about how we can beat a competitor's offer!