Shopping rates FHA

[Amy Lee]

Hi, I was "shopping" for rates because someone advised me that is the way to go. Now I'm realizing it doesn't make sense. I don't get locked into any rate so the rate I shopped 2 weeks ago is not the rate I would get today. Also, I am hearing that FHA rates are pretty similar between individuals at the higher credit scores and varies little. Am I not seeing something about shopping rates on FHA?

[Jason Wray]

Amy,

FHA is only good if you need to put less than 5% down and have less than perfect credit. If you can afford to put 5% down avoid FHA if you have a credit score above 680. FHA caters to those who need to put less down (3.5%) or have lower credit scores (580 to 699) or have lower income where it causes you to have a higher back end ratio usually above 49% and less PITI reserves. If you have to go FHA you need to choose a Big bank one that is Fully Delegated which means has little to no overlays. FHA is the exception if you want to buy a 2-4 Unit as a primary because its only 3.5% so there is a benefit on that scenario.

Most Lenders/Brokers charge points or have to hit their "loan officer compensation plan" AKA bucket. That means they get paid a percentage or "commission" and have to charge a higher rate to get paid. When you work with an FDIC Bank or Credit Union they are not allowed to charge points on Ginnie Mae/FHA/VA/USDA loans. You also do not want to have multiple lenders/brokers pulling your credit you want to narrow it down to (2) options.

There is also "No haggling" with a true bank or credit union fees are set based on fair lending standards. If a lender or broker cuts costs or fee's that means they are breaking the rules and overpriced. When most lenders offer a "Quote" they cannot actually offer you a true rate quote unless you ask for a 30-60 day Locked LE "loan estimate". That would require a full application and a credit pull but it’s a "Locked offer".

If you are not getting a "locked LE" your basically window shopping or getting a "teaser rate" which means the loan officer/broker is giving you the 5 "Day close rate". You cannot close on a day rate meaning close in 5 days. Bankers, Lenders, brokers can see what is known as the 5 day rate which means if someone wants to float and lock 5 days out from closing they can get the lower or best rate.  That 5 day rate is used a lot to offer teaser quotes instead of the actual 30 day lock rate pricing.

Avoid anyone who works at a call center, does not have a team and does not pick up your calls after hours or weekends! Banker hours are for people who are not devoted to their agents and customers.