I spoke with Jennifer Arnold, VP of Residential Lending for Olympia Federal Savings (OlyFed), to get some insider expertise on home loans. She addressed some common misconceptions about interest rates, shared some great tips about selecting a lender, and told me about some pitfalls to avoid when shopping around for a home loan.
Q: Recently, the Federal Reserve Committee cut the federal funds rate to zero. How does that affect potential home buyers and mortgage rates?
A: People think that that rate directly translates into mortgage rates, so we get a lot of inquires where they expect that they will be able to get a zero percent interest rate on their mortgage. The fed rate does influence mortgage rates, but it is not the main driver of determining how those rates are set.
Rates are extremely low, but other factors (employment, GDP, inflation, exchange rate, etc.) impact the total cost of a home loan.
Q: How do OlyFed’s rates compare with other lenders?
A: A lot of times the rates that you see advertised by other lenders are only available to customers with perfect credit scores and very long credit history. These rates are not available to everybody.
Our advertised rates are available to everyone. Other lenders might increase the interest rate depending on the size of your down payment or credit score or history. With OlyFed, what you see is what you get.
Q: What are some of those other factors you mentioned that impact the total cost?
A: Fees that the lender charges translate into how much you pay over the life of the loan. We keep our fees to a minimum, in most cases, charging the actual cost. We don’t make a profit on appraisals. We don’t add extra fees for processing or underwriting. We charge only what we are charged for the credit report or the appraisal, and those savings get passed to the customer.
Q: What else is different about OlyFed mortgages?
A: We don’t sell our mortgages on the secondary market. For our customers, that means that for the life of the loan we will be there for them. We have employees that have been with us for over 30 years, so the same person that helped you set up your loan could be there the day you make your last payment. We value the relationships we make with our customers. They can call us or visit any branch to talk about their loan.
In addition, because we do all of our underwriting in house, we have a flexibility that other lenders don’t have. When lenders are thinking about packaging a loan for a secondary market, they have to follow all the guidelines of the secondary market in order to sell the mortgage. That doesn’t always translate to the best options for the customer.
If you get a home loan through a lender that sells on the secondary market, your loan could be sold once or twice before the first payment is even due. Before you know it, you are scrambling trying to figure out where to send your payment. Ask your lender if your loan could be sold before you are surprised.
Q: What are some other things home buyers should keep in mind?
A: A lot of lenders will require you to pay a fee to lock in your interest rate. You might not be expecting that, and it adds to your final cost. Find out if that is the case with your lender.
OlyFed holds the rate at application and we don’t require a fee to lock the rate in. If the rate goes up, you are covered. However, if rates do go down, at any time during the application process before you close on the loan, we will automatically give you the lowest rate, you don’t even have to call us to ask – it’s just what we do.
Q: How long does it typically take for loans to go through?
A: On average over the last year, our purchase loans have been closing in 28 days, but when we have customers come to us that need to close within 10 or 12 days, we have also been able to meet their deadline. We have an experienced processing and closing team, and they work hard to ensure we are meeting with everyone’s expectations and deadlines.
Q: What about jumbo loans?
A: Jumbo loans typically have a higher interest rate on them. Those would be loans over $510,400, a limit set by the government. But we don’t start our jumbo loan rates until $650,000, so people have a little more borrowing power at a lower interest rate if that is what they are looking for in a loan.
Q: What do you want buyers to know right now?
A: We’re all experiencing extraordinary circumstances right now and we recognize some people are concerned about buying or building a house. Many people started the buy and construction process before COVID‐19 and our state’s stay at home order began. For those customers, we are extending loan commitments. It is a huge decision to buy a home, so we want them to feel confident when they sign the papers that this is truly what they want to do, and we will be there for them when they are ready.