FAQs on how to get the lowest rate: (It’s easy)

6 06 2011



When a client tells me they want to get the lowest rate possible, I think, “Great.  You’ve come to the right place.”  The truth is that we all have the lowest rates.

No one “owns” rates.  No bank or investor corners the market on interest rates.  We all get our rates from the same market.  If you give your information to 10 lenders in town, you will probably get the same rate from all of them, which will be the current market rate for your loan scenario.

“But some lenders use their own money, and could offer below-market rates, right?” 

Banks measure risk to make a profit on their assets.  They either do this well, or they get bought by a larger bank.  Yes, some banks use their own money, usually for loans that they can’t sell on the mortgage market.  But if they do this, all the risk lies with the bank—this means they will either offer an adjustable mortgage so the borrower carries the risk of market adjustments, or they will price the loan high enough so their profits will offset the worst-case rate scenario.  Banks understand risk and offer products that will allow them to stay in business.

“But my loan guy promised he could get me the lowest rate”

Would you trust a stockbroker that promised a guaranteed return on stocks?

“But can’t a lender or loan officer choose to make less?” OR “How did the LO Comp plan affect this?”

It leveled the playing field even more.  Now lenders can only be paid on the loan amount, which means they have no incentive to make more money by giving you a higher or lower rate.  So, even if a lender or loan officer wanted to give you a lower or higher rate, he is forced to offer what his company will allow, which are market rates with the bank’s profits already priced in.

“So what does this mean to me?”

Since the rates are the same, the biggest ways to save on your loan

 are to get expert advice on how to structure the loan to meet your life needs.

Just think– It would be stupid to invest your child’s college money into an investment that was “locked away” until after they graduate, even if it had a higher rate of return.  It would be like buying a car to use as a fancy paperweight.  In the same way, many people end up spending thousands more on their home financing because they get a good rate and the wrong product for their needs.

Please reach out to me for both market rates and expert advice.  Here to serve,

Wilhelm Koenig

405.249.5993

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2 responses

6 06 2011
Natalie Bratton

Can loan officers build in discount points and charge you more on closing costs to give you a lower interest rate? Do they have to tell you they are doing that?
Does 1/4 of a point still cost about $800?

7 06 2011
wilhelmkoenig

Yes, if they are banking the loan. If they are brokering the loan it gets a bit more limiting. But regardless of whether a customer uses a mortgage banker or broker, they are still getting the market rates.

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