Mike: Every loan you got to look at from a different angle, it doesn’t make a bit of difference you know what the box says, it is what is out of the box if you really want to me a better thing for considering. For example, I would rather pay sometimes s 1/4 higher rate with certain programs than a 1/4 less rate because of the benefits of it.
Brad: And so talk about those benefits, what would be…
Mike: For example, let’s take a case where a guy is going to buy a $400,000 home, he is putting 5% down, he is putting $20,000 down. The MI, mortgage insurance is expensive on those things, particularly if you are going FHA or VA or other government things that the insurance is high. So I may tell that same customer, look for another 1/4 percent rate I can do an 80-15-5 which is an 80% first, which takes the loan amount to 80% of the first lien and a 15% second and the combination of those even though the rate is a little higher because Fannie Mae, prices it up a little bit. Even thought the rates are 1/4 point higher, your payments in every case are lower, it gives you the advantage of paying no tax or insurance on your own tax and insurance, you get a deduction because the MI is not deductible over a certain amount of money.
Brad: And a certain amount of money you make.
Mike: Yes, not only are the payments lower but you build an equity in your house, because you build no equity with mortgage insurance so, a lot of times, I tell the customer you are better off to pay say 4% today rather than 3.75% and they go oh well I don’t want to deal with you and I go wait a minute, my payments are $125 lower than your lower interest rate so what do you think, and you got benefits, other benefits from it.
Brad: Building equity quicker too.
Mike: You know it is just there is a seat for everybody; it is just what seat you belong in.
Brad: Yeah and it is making sure that you are working with someone here at Reliance especially that makes…
Mike: Here is another time; someone wouldn’t want to pay a higher rate. Not once, no one wants to pay a higher rate, everybody wants a 30 year at the lowest rate they can but it is not the best thing for them. Let me give you an example of what I am talking about, there is what we call lender pay MI, the lender’s pay the mortgage insurance. Those rates are about .5 point higher but in every case, the lender pay the mortgage insurance if you are competitive, you got really good credit or you shut off the competitive outlets than the payments, even at 4.5% or lower in a 4% rate with mortgage insurance, so there is sometimes when rate is not important, it is really the overall payment you are looking for.