Why do Mortgage lender’s interest rates vary? is it wise to choose the cheapest?

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So forclosure in Hawaii is not a big issue but prices have dropped but homes are still expensive in Honolulu. I looked up mortgage loans and the cheapest offer was 3.75% for a 30 year-term and 4.25% for the most expensive offer. Is it wise to get the cheap one? and why do most people choose the 15 year term. I know its faster to pay it off but as the years pass inflation rises and the value of the dollar goes down and your salary will hopefully increase but your monthly payment stays the same plus I do not plan on having kids so if I die before paying up it will be all up to my sister to pay the rest.

I am located in Hawaii.
Looking for 30-yr fixed rate mortgage.
Seems Internet Mortgage Lenders (IML) offer better interest rates than local lenders.
Concerned about long term viability and stability of IMLs.
Concerned about responsiveness and lack of local representative.
Are IMLs able to consistently close loans at specified rates?
Anyone have personal experience with them?
What do realtors think of online lenders?
Specific lenders of interest include: The Money Store, AimLoan, Home Finance of America

12 Comments
  1. Reply
    Catalina
    January 27, 2011 at 2:53 pm

    Whether you take a 15 or 30y mortage is up to you. Most people take 30y. 10 years ago it was unheard of to have anything but a 30y mortgage.
    – Also the 4.25% is the highest PUBLISHED rate, the highest rate (low down payment, low credit) could easily be over 10%.

    It’s wise to talk to a mortgage broker to find out what is the best situation for you.
    I’m in the process of refi-ing a loan. The lowest rate I was quoted was 3.5% but that included $ 2500 in closing costs. However, another loan was 3.875% with $ 1200 closing, which ultimately saves me money.

  2. Reply
    lou lou
    January 27, 2011 at 3:52 pm

    not safe at all go to your local mortgage company

  3. Reply
    Reapor-ted!
    January 27, 2011 at 4:01 pm

    DO NOT GO TO AIMSTORE OR MONEY STORE. never heard of home finance but I’d stay away as well. are there no brokers in your area that you can speak with face to face? would assume there would have to be some. the fate of IML’s is fickle. meaning that they may be around a year from now and they might not be. usually bigger companies buy them out, consume them and turn them into sateillte offices of the head corp. anyone can close the loan at a specified rate regardless. it’s the broker fees that you need to be aware of. most will charge around 3-5 thousand depending on the size of the loan itself. bigger the loan, bigger the fees required. these are things you CANNOT get around and no one will be cheaper. those that say low closing costs or whatever do offer these low closing costs, however you will pay for it somewhere else in the loan. you’d be safe in looking up national brokers or local brokers, if applicable, and go with them. any questions, email.

  4. Reply
    keni
    January 27, 2011 at 4:51 pm

    if somebody lends you money then goes bankrupt, it is to your advantage, surely? All you have to be sure about is whether the interest rate will increase and what their fees are.

  5. Reply
    loryntoo
    January 27, 2011 at 5:01 pm

    Check Consumer Reports. Be aware that on line lenders have all kinds of hidden fees and they won’t cut you any slack at all for a late payment. They often resale the mortgages before the ink is dry to someone even more shady.

    If you belong to a credit union, they will give you better mortgage rates than a bank. Oh, and the smaller, more local the bank, the better you’ll be treated.

  6. Reply
    utahraptor88
    January 27, 2011 at 5:37 pm

    I got mine via the money store. They were great and they service all their own loans so you do not have to worry about your loan being sold 5 times beofre you even make the first payment.

  7. Reply
    comic1965
    January 27, 2011 at 6:11 pm

    I have to disagree with Lou Lou. Seems like she’s offering a scare tactic answer with nothing to support it. FYI, I am a local mortgage professional. Large, reputable online mortgage companies (of the ones you listed, I’ve only heard of the Money Store) probably can provide you with a loan. If you decide to go with an online lender/broker, watch for the following: Bait and switch on fees, pre-payment penalties, long loan processes that cause your low interest rate lock to expire and excessive fees. Not online lenders use these practices, but they do happen. Also you level of customer service will probably be less. Internet lenders generally make money based on high volume, thus it does not pay for them to offer much service. As a local mortgage professional, I feel most of us offer a competitively priced product, excellent customer service and have FAR more interest in making sure you are happy with your transaction … we live and die on repeat business and referrals. I’m admittedly biased, but I believe there is room for both online and local lenders based on the various needs of consumers. If you have additional questions, please contact me at phl_cocnord@yahoo.com.

    BTW, if your financial/work/credit history has any irregularities, I would STRONGLY advocate workeing with a higher service local professional.

  8. Reply
    balletdncr
    January 27, 2011 at 7:02 pm

    personally I donot recommend it. I would feel very uneasy dealing with someone you never meet and giving them your most important information regarding your finances on the internet. Try and go with a bank or private broker. Good luck.

  9. Reply
    business creature
    January 27, 2011 at 7:56 pm

    Hi, my name is Richard I’m a messenger from Bank One Branch letting or customers and feature customers know about our lowering rates and monthlies. Our money saving program allows us to help our customers like you qualify to save more money on your current loan or find the lowest monthly for your new one.

    This program gives you no wearies on spending money to learn how to save on your current mortgage or finding you a new loan. This program allows us to help you with any questions about your mortgage. Our program could also help you put money into investment property for those who like to invest. We strive to teach or customers as we guide you to the perfect loan.

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  10. Reply
    W. E
    January 27, 2011 at 8:47 pm

    After reading the post – had to answer. One thing you do want to check out is make sure the company / broker can do business in Hawaii. A Broker underwrites of many other companies. The rates are sometimes better than a big bank. A bank is locked in on certain programs they offer, where as a Broker has all the different programs out their. There are too many loan programs to mention. The ones most ppl think of are fixed, interest only, arm’s –

    When you decide – here are some things to remember:

    ADDITIONAL HELPFUL INFORMATION TO KNOW

    Decide on how much you want to spend, if you want to escrow the taxes and insurance. Say the taxes are 1200 a YR and insurance 800 a year (just an estimate, ok) That is 2,000 a year divided by 12 = 166.66 If you paid 1,000 a month now – (166.66) your P/I Principle and Interest would be 833.34. Now you decided on the price range you are looking into. If you have great credit, a 1 loan at 130,000 at a rate of 7 percent over a 30 year time would be 864.89 – This is just a estimate – ok –

    It greatly depends if you need help with closing cost, (The seller could do Seller Help toward your closing cost). If that is the case, I normally tell my clients NOT to hackle over the price, since you are asking for closing cost help – especially if the home is thur a realitor, and the seller has to pay the realitor their fee which runs from 2-6 percent of the selling price, and you ask for 4-5 percent toward closing cost -assistance) Follow me so far??

    Talk with a broker, a broker underwrites for many company’s (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a “hard” pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down

    Try to find someone (broker) that will pull your credit one time, and submit your loan application to company’s that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). This will tell you the up-front closing cost (etc) associated with your loan. This is a estimate only – not the final – but it does help you figure things out.

    Lenders look at the middle score…of the 3 scores. If you only have 1 score or 2 scores (have seen it), it is still workable….but unless a lender sees the whole picture – credit – income – job time, etc – than you will not have a “true” picture of what you can afford – Hope this helps – There are also Government programs out there, but they too are looking for job time, etc…..They are not so much looking a credit – but the other factors are taken into consideration. With a government loan – collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true.

    Decided on the type of program (loan ) you are wanting. A 30 yr fix is still roughly at a 6.5 rate right now – but if you are needing a 90 percent ltv the rate is around 7 percent and a 95 ltv is 7.375 and a 100 percent rate is 7.5 ( This is a estimate only, since I do not know what your credit score’s are….There are also, interest only loans – adjustable loans, option arms (where you pick the payment, from 4 payments, including interest only). Interest only are lower payments, but nothing is being paid on your home. Some self-employed ppl like the payment options, in a lean month when money is tight., they can pay a lesser amount.

  11. Reply
    pknag
    January 27, 2011 at 9:34 pm

    I’m going to have to disagree with the choir of local mortgage brokers chiming in here.

    Let me try to answer your questions

    1. Shop for the best rate, certainly an online lender may be able to give you a slightly better price as their salespeople may not be motivated directly by the rate they charge. Local mortgage brokers always earn more money if they are able to charge you a higher rate.

    2. Use a reputable company, do you research. Quicken Loans, HFA, The Money Store are all relatively reputable. All major brands such as Countrywide, American Home Mortgage, Washington Mutual, also offer mortgages “online” via a centralized lending center.

    3. Unless it is important to you to feel comfortable looking at your mortgage processors, you don’t need a local representative from the mortgage company. The mortgage company will find you a reputable local real estate appraiser and closing agent.

    4. Certainly. IMLs can close loans at specified rates, in fact due to the lack of in person relationship, their practices tend to be under much higher scrutiny than the glad-handing local mortgage broker who will take you out for a beer after signing the papers.

    5. Thankfully, no problems in my experiences, I have done everything online since 1999.

    6. They frankly don’t like them, as Realtors like to control the mortgage business. It gives them leverage with the appraisers, settlement agents and mortgage lenders, and potentially pays in gifts and incentives to become buddies with your local mortgage broker.

    Hope this helps. In general, any company can do a bad job or act dishonestly with a consumer. Online or offline. Work with a reputable company. Do your homework but don’t be blinded by the simple fact that a company may be local.

  12. Reply
    Bletza.com
    January 27, 2011 at 10:16 pm

    As a mortgage Broker I can tell you that Internet “Mortgage Lenders” charge local lenders for your lead. In other words a Local Mortgage Company will pay around $ 30 for your information. Internet services are very competitive because it allows regular people to find lenders that were not normally known by most of the people.

    You will never go wrong doing a research for those companies check bbb.org for information as well.

    Good Luck

    http://www.bletza.com

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