PACIFIC MORTGAGE LENDERS

The owners of Pacific Mortgage Lenders, Inc., Steve & Cheryl Lorimer, are frequent travelers of the inside passage waterways in the summer months, cruising as far north as Glacier Bay, Alaska. In the fall, winter and spring months they can be found boating in the nearby San Juan Islands of Washington or the Gulf Islands of southern British Columbia. Steve & Cheryl own a 32 foot powerboat and tow a 15 foot aluminum skiff, which they use for fishing and exploring. Attached to this website are some of the boating photos that they have taken.
In addition to being in the home loan industry for over 25 years, Steve & Cheryl are the owners of Pacific Realty Group, Inc., a real estate sales business.

   Most prospective home borrowers attempt to find the ‘Best’ interest rate by calling around from lender to lender. The typical question asked is, “What is your interest rate and loan fee today?” Some lenders, usually local banks, will quote a single rate and fee for each type of loan, ex. 30 year fixed, 15 year fixed, or whatever. In reality, most lenders offer multiple rate and fee combinations. For instance, a person may get a rate quote at a zero percent loan fee, one percent fee, two percent fee, etc. The larger the fee, the lower the interest rate and vice versa, the smaller the loan fee the higher the interest rate. Generally, it costs a .50% fee to buy up, or down, each 1/8th% interest rate. For example, if a 6.25% rate costs a 1.0% fee, a 6.125% rate would cost 1.50% fee and a 6.0% rate would cost 2.0% fee.

                                                                                                   Break Even Analysis…

   If a borrower intends to have a home loan for only a short period of time, it does not make any sense to pay a loan fee to ‘buy down’ the interest rate. Here’s another generalization: It takes approximately 5 years to recoup the fees paid at closing. A person that is likely to get a job transfer in less than 5 years, for example, may be better off choosing a higher rate to reduce closing costs.

                                                                                          Total of 5 types of loan costs…

   There are five types of loan costs that together determine the total cost of a home loan. These include:

1. "Wholesale cost. . ."

     Each interest rate has a cost (called discount points) or a credit (referred to as either rebate pricing, or yield spread premiums). A borrower can pay extra money to buy-down their interest rate or can choose to have an above-market interest rate and get a credit at closing to apply to their closing costs.

Let's look at an example:
    Rate: 5.75% at a fee of 1.5%; Rate: 5.875% at a fee of 1.0%; Rate: 6.0% at a fee of .50%; Rate: 6.125% at a fee of -0-; Rate: 6.25% at a Credit of .50% Fee; Rate: 6.375% at a Credit of 1.0% Fee; Rate: 6.50% at a Credit of 1.5% fee and onwards. In this example a par price (-0- loan fee) has a rate of 6.125%. If the borrower chooses a lower interest rate than 6.125% he/she will pay discount points. If the borrower chooses to pay an above market interest rate (higher than at par pricing), the borrower will receive a credit from the lender at closing (referred to as rebate pricing or a yield service premium). The wholesale cost of a loan moves up and down on a daily basis and the lender originating the loan should disclose their cost (loan origination fee) as a fixed percentage or as a fixed dollar amount. Not only does the wholesale fee change daily, but by not disclosing the lender's fee separately (usually referred to a loan origination fee if a bank is doing the loan, or the broker fee, if originated by a mortgage broker), the lender can adjust their profit margin upwards regardless of which way the interest rates are moving! The only way to choose a reputable lender when shopping for an interest rate is to require that lender to disclose their wholesale cost AND their mark-up above their wholesale cost AS A FIXED price. Beware of the mortgage broker who discloses their fee as a RANGE, say 0 to 2%, rather than as a fixed cost, too. You won't pay a "range" of costs" at the closing table, so why get a QUOTE that has a range of costs, when all the costs are known at the time of application? Ask the lender to see a copy of their wholesale rate sheet at time of origination AND again at the time that the loan is locked in, if done at a different time.

"2. Loan Origination Fee, (Broker Fee) or Lender’s Profit Margin:"

   At Pacific Mortgage Lenders, our borrowers pay a 1.0% loan fee, above the wholesale price, regardless of the loan amount, or type of loan chosen by the borrower*. If the borrower chooses an interest rate above market, the yield service premium credited by the lender is used to offset our 1% fee. Most other lenders charge a fee of 1.25% to 1.50 % plus junk fees (see below).

3. “JUNK FEES…”

    Another factor in choosing the ‘best’ rate is the cost of the extraneous closing costs, frequently referred to as garbage fees, or junk fees. It is possible that one lender offering the lowest interest rate at the lowest loan fee, could in reality, be charging the highest cost. Why? Because most borrowers only ask lenders, "what is your rate, what is your loan fee?" If one lender charges a $600 loan processing fee, a $250 administrative fee, a $100 appraisal review fee and a $390 underwriting fee, for a total of $1,340 and the other lender charges only a $550 underwriting fee, the difference in ‘garbage fees’ is $790 in favor of the second lender. AT PACIFIC MORTGAGE LENDERS WE DON'T CHARGE ANY JUNK FEES-GUARANTEED!

4. “Normal” Closing Costs…

     Within a fairly small range between lenders, a borrower can expect to pay similar amounts of money for appraisals, credit reports, title insurance, flood research fee, tax service fee, recording fees, courier fees, and escrow fees. The single largest cost associated with a home loan is the lender’s profit margin (usually called a loan origination fee, if a bank or a broker fee if the loan is originated by a mortgage broker). The total profit to a lender could also contain money the borrower pays to the lender for a ‘JUNK’ fee. The prudent borrower will closely look at all of the closing costs (including a disclosure of the lender’s wholesale cost, if the lender will disclose it-most won’t).

5. "Pro-rations and Reserves…"

   Interest per-diem, pro-rations and funds required to set up a reserve fund (for payment of taxes and insurance) are not really closing costs, but they are expenses that the borrower will incur at closing. Utilities, home owner association fees, condo association fees, private mortgage insurance and other similar expenses are typically pro-rated at closing.
All lenders will pro-rate the first month’s interest expense at closing based on the date that the loan closes. Some lenders will make an initial Good Faith Estimate disclosure that this cost is 30 days, while another lender could disclose 1 day. This cost, at closing, will be whatever it is, regardless of the initial disclosure, based on the number of days left in the month that the loan closes. Typically a borrower will provide the lender with evidence of a homeowner’s insurance policy at closing and will also pro-rate the real estate property taxes. If private mortgage insurance is required, or flood insurance, these additional items will need to be pro-rated and collected at closing. A good idea to keep in mind is to get a quote as to what the interest per diem is likely to be as of the projected closing date and get quotes for all of the pro-rations. This way you will know how much money will be needed to close the loan BUT, when you compare one lender to another, DO NOT include these costs!

Other Home Loan Concerns…

     Rate/Fee loan Lock-in: As was demonstrated above, there are numerous costs that need to be examined when choosing which lender has the apparent ‘best rate and fee’ combination. It is not the interest rate on home loans that moves up and down, it is the wholesale loan fee that moves daily. Because of the movement in wholesale costs, it is important to consider locking in a rate and fee, unless you don’t mind gambling. A lender that will NOT lock in your rate and fee because (of multiple excuses, frequently confused as reasons) should not be considered. Get another quote.
   A borrower who chooses a lender BUT does NOT lock in their loan at the date of application, AND who is never shown the wholesale costs of the loan, can almost guarantee themselves that any movement in the marketplace will be at the borrower’s expense, not the lender’s expense. A lender that discloses their origination, or broker fee as a fixed cost above the wholesale expense will not be playing any games with the borrowers. There are a number of issues that relate to the wholesale costs. As was previously stated, they move up and down on a daily basis. Lenders who DO NOT lock in the loan at the time of origination (when they appear to have the BEST pricing), may, in fact, have much worse pricing at a later date. Getting quotes from lenders based on the same amount of time for a rate lock-in should be a given. One lender offering a 45-day price guarantee, compared to another lender offering 15 days, 30, 60 or NO price lock-in is all apples to oranges. A lender who does not disclose their wholesale cost or profit margin will always be tempted by greed. If you are going to NOT lock-in your loan at time of application, for whatever reason, it is prudent that you require your lender to disclose the wholesale cost and their profit margin, up front and then again when the loan is locked in. The profit margin charged by the lender should not change, just because the wholesale market changed.

Our Guarantee… At Pacific Mortgage Lenders, we have always disclosed all of the costs, inclusive of any JUNK fees, the wholesale cost and our mark-up on the loan (mortgage broker fee) at the time of application and at the time that the loan is locked in. In fact, we are happy to SHOW our borrowers the wholesale rate sheet of the lender we intend to place the loan with-not just disclose the pricing! We do NOT (and have never) disclosed a Range of fees. We have ALWAYS fully disclosed any yield spread premiums that are paid on a loan- even before the disclosure was required by law. We also are happy to GUARANTEE that all closing costs are fully disclosed on the Good Faith Estimate, or Pacific Mortgage Lenders will pay the difference at closing. Our policy is to have NO SURPRISES…EVER!!! Great Pricing-Great Service… Full disclosure! We offer hundreds of loan choices with multiple rate and fee combinations. As you shop around for the ‘best’ rate and fee combinations, we urge you to keep the above issues in mind. We pride ourselves on not only providing great pricing, but on also providing service that is exceptional.