Clearwater Real Estate Mortgage 101 – Mortgage Rates versus Fees

Low Clearwater Mortgage Rates versus Home Loan Fees

Clearwater Florida – Kevin Sandridge shares the difference between Tampa Mortgage Rates and Home Mortgage Fees. “If you’re in the market for piece of Clearwater real estate and are becoming more and more enamored with what are now historically low mortgage rates, please take note:  You can’t always believe what you read in the papers.  

The chart on the right is a terrific example.  It’s published by the good folks at Freddie Mac and shows the “going rate” for a 30 year fixed-rate mortgage as reported by U.S. lenders.

  • As of the end of December 2008, the chart shows a rate of 5.1%.  Yeah! 
  • What the chart does not show is an accompanying “required fee” for this rate of 0.7%, or $700 per $100,000 borrowed.  Boo!

This fee is more commonly known as “points” and versus last year, Freddie Mac’s points nearly doubled from last year’s average of 0.4 points.

So, Why Does Freddie Mac Charge Mandatory Fees when buying a Clearwater home?

The truest answer I can give you is, that Freddie charges mandatory loan fees (read, points) on conforming loans in order to make up for the money they have and continue to lose through foreclosures.  These loan-level fees represent mandatory mortgage charges – which act sort of like interest rate adjustments on every mortgage application.  They’re not closing cost fees – but rather, a “tax” being levied on today’s well intentioned, well qualified borrowers!  Ugh.

In the past, mortgage rates were tied directly to mortgage bonds and reacted accordingly.  And while today’s rates are still based on mortgage bonds, they also factor in the fees charged by Freddie Mac (and Fannie Mae, for that matter).
All this said, there is good news.  Florida mortgage rates are still low enough that the Clearwater home loan-level fees charged by Freddie and Fannie don’t hurt quite as much as they otherwise might.   Just realize that the rates we’re seeing today do have these fees associated with them, and know that you will be paying a little bit more than the posted rates imply.

In many cases, Florida home loan rates and the fees associated with them do tend to move in opposite directions.  If you’re focused on the absolute lowest mortgage rate, you might consider paying the additional points.  Conversely, if keeping fees to a minimum is important to you, you’ll likely have to accept a little bit higher rate on your home loan. It’s a trade-off, and your Florida mortgage broker can help you best understand the choices. ”

If you’re looking to understand all your Florida mortgage options, please give me a call at 863-604-3019, or contact me via email at – Kevin Sandridge”

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Copyright © 2009 Jack and Cyndee Haydon, Clearwater REALTORS and your Clearwater Real Estate Consultants specializing in Clearwater St Petersburg Tampa Real Estate and may not be copied, reproduced, distributed, transmitted, displayed or published.

(Image courtesy: The Wall Street Journal)

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