A Michigan mortgage secret

Locking in a mortgage rate in Metro Detroit and around the country.

Here is what happens when you lock a Michigan mortgage loan.  You tell your mortgage loan officer to lock your loan at 4.875% on a 30 year fixed rate.  The loan officer calls the bank or lender and locks the loan in with usually their “rate lock department” or their “secondary marketing department“.

What you don’t know is that the bank then tells the secondary market that they will deliver a loan to them as a 30 year fixed rate at 4.875%.  What I mean by that is the bank commits to sell the loan to somebody at that rate.

So when the mortgage rates go lower the bank usually can’t just give you a lower rate.  They have committed to sell the loan at a certain price.  So if they want a lower mortgage rate they will make less money.  So in turn the loan officer will make a lot less money.  Sometimes the loan officer won’t make a dime if they lower the rate.

So that is why banks and loan officers balk at lowering the rate.  It like committing to sell 4 ounces of gold at $500 to a bank.  The Bank commits to sell the same gold to somebody else at a set price ($550) once you sell it to them.  But now you want a better deal.  You want $550 for it because the price went up.  But the bank has already re-sold it at $550.  They have to sell it at the $550 because they have a long term relationship and a commitment to their secondary buyer.  They don’t want to give you the $550 you want because then they make no money or very little money on the deal.  That is basically what happens in the mortgage business.  Banks can’t just automatically lower the rate because they are just a cog in the process.  They are committed to sell the loan at a set price.

What a lot of mortgage consumers don’t know is that many times we as loan officers will switch banks or lenders to get you the lower mortgage rate.  We have to start the mortgage process all over with a new bank to get you that lower rate.  Banks and lenders don’t like that we do that.  In fact some banks will cut you off if you do it too much.

With refinancing your mortgage we can do that because all it is to you is a longer wait to close.  When you are buying a Metro Detroit home sometimes we can’t do that because we run out of time.  If rates drop two weeks before closing we don’t have time to start the mortgage process over again.  You may be stuck at your original locked mortgage rate because there is simply no time to get the mortgage done in the time before you are scheduled to close on yourMetro Detroit home.

I hope that explains why some banks, mortgage brokers, or lenders don’t just give you thelower mortgage rate automatically.

Russ Ravary

your Metro Detroit mortgage person

 

My quote of the day:

“I long to accomplish a great and noble task,
but it is my chief duty to accomplish small
tasks as if they were great and noble.”

~~~ Helen Keller ~~~

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