Qualified buyer prospects as a group are highly sought after by lenders in all categories from credit unions to major banks. Many are offering a menu of snazzy sounding promotions, discounts and incentives. A SmartMoney article, New Discounts for Mortgage Borrowers, dated October 5, 2011, offers a cautionary note for borrowers.
In a nutshell, “Critics say the newest offers still stop short of the best deal for borrowers: Lower rates,” according to AnnaMaria Andriotis of SmartMoney.com. The bottom line is that some institutions offer such enticing incentives that buyers are distracted and fail to simply negotiate for a lower interest rate.
Offers and Incentives Some of the high profile buyer incentives noted in the article are:
- “Capital One is waiving some closing fees for refinancers, which can save $3,300 on average.
- Citi and Bank of America are discounting fees by as much as 0.75 percentage point.
- Quicken Loans is telling customers who get a mortgage through December that if mortgage rates fall in the future, they’ll be able to get the lower rates with most refinancing costs covered.
- The Navy Federal Credit Union (designated for Department of Defense employees and their families) began offering $2,500 off of closing costs for borrowers.
- Capital One is eliminating on average $3,300 closing costs — including the appraisal and title-related charges — for homeowners who refinance into a 30-year mortgage in some locations, including New York, Texas and the Washington D.C. metro area.”
The Catch According to Keith Gumbinger, Vice President at HSH Associated, a mortgage data firm, “If you’re seeing incentives, there might be a catch. To qualify for the Bank of America discount, for example, consumers must have at least $50,000 socked away with the bank or its investment firm.”
There are exceptions. HUD’s $100 Down Payment program allows qualified buyers of HUD- owned homes in certain states to secure FHA mortgages with a $100 down payment. Buyers should ask their real estate professional if their state and dream home are eligible. Qualified buyers can use the program and still negotiate for the best interest rate.
Shop Around Prospective buyers are well advised to diligently shop the market for best interest rate deals. After all, the mortgage is the single most important component of the home buying transaction. The terms often dictate the buyer’s long term success or failure as a homeowner. While comparing terms from large banks don’t overlook neighborhood credit unions, small local banks, online banks or organizations like USAA – a resource for military personnel and military families.
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