The Happy Problem

What an amazing run on mortgage rates in the last two weeks. Ever since the announcement from the Federal Reserve to buy mortgage backed securities and the Treasury Department announcing intentions to drive mortgage rates lower to as low as 4.5%, we have seen rates drop to the lowest levels in recent years.

Of course, what everyone wants to know is: will it go lower? How low? When will it be the lowest? For the past twenty years in the industry in the industry I have been asked these questions. I've consulted with a gamut of gurus who can predict the exact trend of rates. Some of them charge money for their advice, some of them did it as a favor and others just did it as a hobby. Some of them were right - and sometimes they were wrong.

I do remember one person who was right all the time. He was uncanny in his predictions; as if he could see the future. It's too bad I lost track of him. It seems his success in his predictions allowed him to retire early. He left mumbling something about planting ginkgo trees...

Jokes aside, my borrowers ask me these questions because they want the best advice in regards to their particular loan application. Nailing down and locking in the lowest rate is like hitting a moving target. It is always tricky if not impossible to do. Rates change and a good rate today may not be a good rate tomorrow. And if you don't lock in today, come tomorrow that rate could be gone. It looks like a game with no winners.

From lenders to brokers to borrowers we are all flustered by the market dynamics. So what is one to do?

My best advice has always been that it depends on each individual situation. What is important to a borrower closing on a purchase transaction can be very different that someone looking to lower their rate with a refinance. Some times the type of program makes a difference, and sometimes a higher point/rate structure actually makes sense. This is what makes working with a mortgage professional so essential. We have a number of tools available in order to maximize the opportunity to lock in the lowest - such as float down options, quicker loan processing and closings, streamline applications and other methods.

The bottomline is this: rates are very good right now, so this is a happy problem. Especially in the age of the internet there will always be someone to promise a lower rate. Sometimes they are true and other times they are not (and you would be surprised how many times they are not). However, I believe we would all be better mentally prepared to solve this problem if we realize that we are struggling for a gain and not a loss.


Joe Wang is the owner and founder of Fortune Mortgage Company and Borrow123.com. You can reach him directly at joewang@borrow123.com