The interest rate game, who wins, who loses and why.
You get in your car after a long day at work, flip on your favorite radio station and are bombarded with advertisements from slick, used car salesman-like mortgage 
companies that promise you the lowest interest rate and/or no closing costs. While driving home you pass a billboard on the side of the road promising you a 1% interest rate and that “everyone qualifies”. Then at home on TV you again suffer through another commercial telling you that “people are smart” so get a low fixed rate and only $395 in closing costs. Well, people are smart but the people behind the TV ad don’t think so. They think you don’t read, can’t do math and that you are gullible enough to trust one of the largest financial decisions of your life to a stranger over the phone. Unfortunately not only are people smart but they are busy as well and many times unknowingly fall victim by slick marketing gimmicks. Any person, firm or company that promises you the “lowest rate” assumes that you know nothing about finance and how mortgage interest rates are determined. In a residential real estate purchase with a 45 day closing, interest rates will change anywhere from 30-35 times between the date the contract is executed and the closing date. So how do know when to lock the your interest rate if rates can change that many times before you close?
The first thing you should do is get a referral. Speak to friends, family and preferably a real estate professional and find out who they have worked with in the past. Next, make sure you are working with an experienced and knowledgeable finance professional. You can do that by asking the four simple questions in this document, Win The Interest Rate Game. Once you have located someone you have confidence in you should complete your application with that person and discuss how the financing is to be structured and which loan program you will be using. The mortgage banker should then provide you with a good faith estimate of the terms within 3 days of application. Pay close attention to the loan program which is of paramount importance. Even the lowest interest rate on the wrong loan program can be financially devastating; ask any one of the tens of thousands of people around the country who are losing their homes in foreclosure because their short term adjustable rate mortgage is re-adjusting.
Expect a reasonable interest rate. If you go on the Internet, you are going to be misled by the interest rates you see. Many will claim “no points” but what they don’t disclose is the thousands of dollars in lender fees. Industry statistics show that more than 40% of individuals who work with Internet lenders end up with something other than what they were originally promised. Spreading your personal information all over the Internet to three or four different lenders in an effort to save an 1/8th in interest rate is a fool’s errand. While interest rate is important it is by no stretch of the imagination the most important thing about your new home loan, as a matter of fact it is probably forth or fifth on the list in terms of importance. By establishing a relationship with a professional with a clear understanding of finance you will win the interest rate game every time. Saving a couple of hundred dollars in fees or an 1/8th in interest rate is not a win. For most of us all the wealth we will ever need will pass through our homes. Getting a reasonable interest rate, utilizing the correct loan program and structure and managing the equity in your home properly over your lifetime to create long term financial stability, now that’s a win.