Tag: MacKenzie Price

Interest Rate vs. Closing Costs: A Simple Calculation

When helping my clients evaluate their mortgage options, I give them choices between the lowest interest rate with standard closing costs and a higher interest rate with lower closing costs.  Some people are most concerned with the monthly payment being as low as possible, while others want to save their up-front money. It’s a simple calculation to see which option is best for my clients.

Here’s an example with a $350,000 house and $280,000 loan amount:

Option 1: 30 Yr. Fixed Interest Rate: 4.375% (4.425% APR)

Closing Costs: $2560

Monthly P&I: $1398

 

Option 2: 30 Yr. Fixed Interest Rate: 4.5% (4.55% APR)

Closing Costs: $110

Monthly P&I: $1418

So for an extra $20 in monthly payment and .125% in rate, one can save $2450 in closing costs.  Is it worth it? Divide 2450 by 20–it takes 122 months for the higher monthly payment to be more expensive than putting extra cash down up-front.  So if you are going to have the mortgage for more than 10 years, then it’s worth getting the lower rate.  If you think you will sell or refinance before then, it’s better to save the money at closing.

If you are considering buying or refinancing a home, give me a call at 512-587-9936.

MacKenzie Price

Sr. Loan Officer

Capstar Lending

512-587-9936

mackenzie.price@capstarlending.com

NMLS#226753

Where To Go For Your Mortgage? Mortgage Banker vs Broker, or the Best of Both?

When you begin your search for a new home, one of the first things to consider is where you’ll get the money. Your basic choices will be mortgage brokers and banks.

Your first instinct may be to go with your bank, because you know them from doing business with them for your checking and savings accounts. But you’ve probably also heard that mortgage brokers can get you a better interest rate, since they deal with multiple lending sources. It can be confusing, but there’s a third source of funding that combines the best of both–the correspondent lender.

In order to understand the differences, let’s look at how the lending process works in each case:

Mortgage bankers are given rate sheets by their institutions, telling them what interest rates they can quote to their clients on any given day.  Mortgage brokers have an advantage in that regard. They’re not loaning their own money, and are free to “shop your loan around,” looking for the best terms from various lending sources. Since they have many sources to choose from, they can often find loans at lower rates than most banks.

While a broker is often more competitive than a bank, they have two disadvantages when it comes to underwriting the loan.  Because a broker is placing a loan with a lender, they have to send the loan file to the lender to underwrite, which takes time and can leave the borrower and mortgage broker wondering what the lender’s underwriter will do with the file.  Banks underwrite their own loans, but due to the volume and nature of their business, the turn-around times can be excessively long as well.  Secondly, a broker doesn’t control when the loan actually funds because they have to rely on the lender to provide the money on closing day.

The third alternative, correspondent lenders, combines the best features from both groups. Correspondent lenders are similar to mortgage banks in that they make the lending decision and fund the loan with their own credit line.  This means faster turn-around times for loan approvals and closings. As soon as a loan has closed, it’s sold to another lender that they chose based on best interest rate and product at a previously negotiated price.

It’s the best of both worlds for you as a borrower. You’ll be dealing with the lender who is underwriting and funding your loan, yet they are able to shop your mortgage around, getting you a lower interest rate and the mortgage product that fits your needs.  A correspondent lender offers an attractive alternative to a banker or mortgage broker when it comes to shopping for your next home loan.

Capstar Lending is a correspondent lender located in Austin, Texas and MacKenzie Price is a Senior Loan Officer available to help with all of your mortgage needs. MacKenzie has been in the business since 2001 and is an expert in residential mortgage lending.  She holds a BA in Psychology and Economics from Stanford University.

MacKenzie Price / Residential Mortgage Loan Originator / NMLS #226753
512-587-9936
mackenzie.price@capstarlending.com