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Isn't that what every mortgage company promises?

5. 75 % - apr. 6. 371% (8.502 - 5yr)
6. 75% - apr. 6. 891% (7.346 - 5yr)
as of March 1, 2002
(Current Rrates,
link at bottom of the page)


Both of the above rates were real on the date listed. One was a great deal, the other was not. The cheapest rate had an extra 5 points attached. On a $150,000 loan amount that's $7,500. "BUT, look at the APR." you say. Yes, the APR is correct. The truth lies in the fact that the extra points are amortized over a thirty year term. The average person keeps a loan for about 4 years and a house for about 5. If you really have the loan for 30 years and the extra $7,500 to spend, it can be a good deal. Your break-even point is 78 months (6.5 years) and after that you are ahead of the game.

If, on the other hand, you are like most people and re-finance or sell in 5 years or less, you need to consider what the APR over a 5 year term would be 8.502% and you would not even break even.. Although I have all rates available, I can't in good conscience ever recommend paying extra points. Getting a mortgage is expensive enough as it is and even my parents didn't have the same loan for the 40 years they owned the house.

The point to this story is; you need to know what you are REALLY getting when someone tells you they have the lowest rates. The fact is we all have the same rates because the all come from the same source, the Bond Market.

More on rates.

The rate you can expect on your loan is totallly dependent on the perceived risk on you individual loan package.

The rates typically quoted by lenders are for "A" paper or "Market rates". ( Which means a high quality loan package that is able to meet the standards of the government backed agencies that we call "Fannie Mae" and "Freddie Mac", because that is where 80% of the money for Mortgages comes from.) These agencies sell "Mortgage Backed Securities" (MBS's) on the "Bond" market. These are traded like any other "Bond" and compete with Stocks and other Bonds for investors money. All rates are quoted "subject to change". Translation: they change constantly.

Since they change constantly, I always quote rates as a range until you "lock-in". When you "lock-in", the "Servicing Lender" I am selling your loan to, goes to an agency and "buys" the money for your loan at that moment.

The problem with quoting rates online is that they are constantly changing and I have yet to find a site that honestly gives a "real market" update on a moment by moment basis. The typical "Quote" is the current available rate with some amount of points added to make it look better. Go figure.

The other thing that is valuable to remember is that all lenders "go to the same well for water". In other words we all have the same rates available. Therefore, the real difference in rates between all lenders is extremely small if any.

So you ask: "What is the difference?"
The difference is in the amount you pay up front in closing costs. If you pay points you get a lower rate. If you pay lower closing costs you get a higher rate.
This is one of "the games lenders play". ( more on games )

The real difference between lenders is the service you get. What you want is someone who will explain all of the variations possible. Someone who will help you select the the loan program and fee structure to best fits your individual needs and ability to qualify. With literally hundreds of programs and rate/fee structures available, the best way to select a lender is to find someone willing to take the time to help you properly. There is no "one-size-fits-all" program.

Shop for someone that looks or feels right to you and has the ability to help, even if your credit is a little bruised. In today's market there are many ways to get a mortgage. If your loan file isn't perfect, that's when the real shopping begins.

Start with getting a credit report. In today's world credit is the most important item in determining if you can even qualify for "A" paper or a "Market Rate" loan. If your credit is less than perfect, it may still be able to be fixed so that you can qualify for "A" paper. If not, the rates will be higher on your loan.

OK, so enough rhetoric. Here's the only place I've found where you can go for an honest quote ( "right from the horses mouth", Freddie Mac )They are not trying to sell you anything, just compiling data. This quote is the national weekly average of the rate and points charged by lendersacross the country. It may not be perfect, but it is enough to keep your lender honest..


Thank you again for visiting,


1-800-578-1555   •   801-631-9933   •   575 East 4500 South, B-170   •   Salt Lake City, Utah 84107   •   dave@udy.net