Have The Talk!

Okay, so rates went up sooner than we all thought and certainly much faster. We all should know that rates will always rise faster than they will fall and this time is no different. We can all look at the technical side of things and follow all the charts, but for our clients and our referral partners, we need to get the information out quickly and clearly as to what it all means and what we should be doing. Don’t get me wrong, I appreciate all of you who want to show charts of rates and graphs with ceilings and floors of resistance. However, the important thing to do is to share information that people can use and relate too. Let’s be honest, if I told the average customer or referral partner that the next floor of support was going to be at “X” and that after that the next floor of support is at “Y”; most people would roll their eyes and want to know what it all means to them. So study the charts, but it’s time to “Have the Talk” about what it really means and sooner is better than later!

What we need to share is useful information to help people make choices. We aren’t going to cause a panic if we just “Have the Talk”. What do we talk about? The answer is, what does it all mean when rates go up? First thing we need to do is make everyone aware of rising rates. The actions steps are:

1) Share the information with your referral partners.
2) Share the information with your clients.
3) Call all of your current pre-approvals and recalculate the numbers.

What information do we share? Here are a couple of charts that might help.

Monthly P&I on a $250,000 – 30 year fixed rate loan (What it costs per month)

3.5% $1,122.50
3.75% $1.157.50
4% $1,192.50
4.25% $1,230
4.5% $1,267.50

The recent rise in rates from about 3.5% to about 4% means a difference of $70 a month in payment. But what if your borrower no longer qualifies at a higher payment? What if the maximum P&I for your client was $1,125 per month? Here is what $1.125 per month gets you on a 30 year fixed rate loan.

$1,125 a month @ 3.5% = $250,556
3.75% = $242,980
4% = $235,849
4.25% = $228,658
4.5% = $221,893

So a client that qualified for a $250,556 loan when rates were at 3.5% now only can qualify for a $235,849 loan when rates are at 4%.

Realtors® must look at every pre-approval and certify that the information is now accurate and current. We don’t need “practice” putting deals together, we need to put real deals together that will close. Be of help to your Realtor® referral partners and offer to review each client and prepare for them an updated –pre-approval. Remember, just last week rates moved a long way. Almost $15,000 in purchasing power has been lost to higher rates given our scenario.

Accountants, financial planners, your database of people who were “waiting on the bottom” all need to know the “bottom” has come and GONE!

Most importantly you must reach out to your current pre-approvals and share with them the story. They won’t be happy but rates are not within your control, but solutions are. Maybe the 30 year fixed won’t work, but maybe a 5/1 or 7/1 ARM will get the job done? Maybe in lieu of a larger down payment, using points to buy the rate down could be an option? There are many possible solutions; you just need to be engaged!

DO NOT HIDE! You don’t control the market! Bad news is like a dead fish, it does not get better with age! Rates are still GREAT! They may not be as low as they once were, but a 4% interest rate on a 30 year loan is still a great deal!

Questions or comments please contact me at Mike@IMTCoaching.com or go to our website: http://www.improvemytomorrowcoaching.com

Published by

Mike White

Improve My Tomorrow Coaching is a company founded by Michael F. White to help mortgage professionals reach their true potential. Based on a belief that working the fundamental principles of the loan origination business combined with a solid system to leverage your day to day business into a self sustaining career! If you are looking to generate consistency in your business, you need to know and implement the fundamentals. Once you know what to do and when to do it, being a mortgage professional is fun, challenging, and profitable. Since the average loan originator in the country closes less than three loans a month, the average originator is unaware that closing seven, ten, twelve or more loans per month is often easier and less stressful than just two or three! If you are tired of the pain and punishment of not knowing where your next deal is coming from; if you spend more time being “busy” instead of “productive”; you need to look and see how we can help you get to a whole new level of business. Take some time to explore this website and read all the free information. If you find some things that cause you to rethink how you are currently doing your business, let us help you! It starts with YOU! There are two programs you can choose, a group program and private coaching. Please look at both before you make your choice.

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