Interest rates are at or near all-time lows. However, when shopping for a new home loan one thing you need to be cautious of could be referred to as the "Great Misconception" or "Great Deception." Beware of whom you speak with - they may not have your best interests in mind.

This month, YOU Magazine visited with Jim McMahan, President of McMahan Mortgage Consulting and Executive VP of Benchmark Mortgage, to ask, "What should someone be looking for when considering a mortgage professional?" McMahan, a 22-year veteran of the business offered some interesting thoughts and personal experiences as a consumer that would serve anyone well when seeking advice and direction about a home loan.

Acting now to capture a great rate is great advice for many, but as always, the person whom you choose to do business with can have a big impact on whether or not the outcome is in your best interest.

A Tale of Two Loans
McMahan, who owns two homes, both with adjustable rate mortgages (ARMs), started taking notice when the servicers of his loans began calling him, suggesting that he refinance. After first dismissing the calls, he began to respond to the callers as though he did not work in the lending industry, just to see what they had to say.

His experiences on the phone alarmed him. People that were calling to suggest that "now" was the time to refinance actually knew little about his existing loan and nothing about his personal situation. That being the case, how did they know that "now" was a great time to act?

In McMahan's case, one of his ARMs was scheduled to adjust in the short term and the other was not scheduled to reset for years. Both were at very attractive rates and based on current interest rates, would adjust lower at the time of resetting. In each case, choosing to act upon the advice of the caller would have resulted in increases in his interest rates and payments.

Choosing to act prudently and converting an ARM to a fixed rate can be beneficial for many but in all cases, additional information needs to be reviewed to make a wise decision. And while McMahan is not suggesting that you shouldn't take the advice of someone offering you a new loan, he does recommend you work with an advice-based mortgage professional. An advice-based individual will supply you with information to help you make the proper decision, not simply tell you what they think is best.

It's All About the Questions
McMahan suggests asking questions that will determine if they are a professional and if they are truly taking your personal situation into consideration. With McMahan, it's all about the numbers and whether or not it makes sense economically to move forward. In order to determine if entering into a new transaction makes sense for you he suggests you ask the following questions.

• Do you know what my current interest rate is? It is likely they will not. If not, how do they know that acting now is responsible?

• If you have an ARM, Do you know what my rate will be adjusting to and when it will reset? In order to determine that rate, you will need to know the margin and the index the loan is tied to. For example, if your loan is tied to the One Year Constant Maturity Treasury Rate (CMT) and has a margin of 2.75, the interest rate if adjusting today would be approximately 3.25-3.375%. Also, if your loan is not scheduled to reset for years and you anticipate you might be selling your property, it may not make sense to act.

• What would my closing costs be to obtain a new loan and why are you recommending that I take that loan today? Closing costs are a major component in deciding to move forward with a new loan. If the costs outweigh the benefit for the time you expect to have the loan, it may not make sense to proceed.

• Does it make sense for me to pay points to obtain a lower interest rate and if so, what would be the approximate time required to receive the benefit of paying points? While in the past, it usually did not make sense to pay points to obtain a lower interest rate, McMahan indicates that in today's lending environment the opposite may be true. Current market conditions are such that paying points can often yield an interest rate that is much lower than in times past. However, you must see the numbers to make an educated decision.

• Are there any circumstances about my situation that could cause me to pay a higher interest rate than what I see discussed in the news? Today, the amount of equity in a transaction and/or one's FICO score can play a significant role in the interest rate that can be offered. Risk-based pricing can either increase your available rate or the fees you could be required to pay. Anyone offering you a rate without knowing all the facts could be doing you a huge disservice.

McMahan states, "So many times people that we frame in our mind as experts have almost no clue what they are talking about, especially as it pertains to us (as consumers)." Someone who doesn't know you or your personal situation may offer advice that is off the mark.

An example would be advising you to pay points to obtain a lower interest rate and not asking if you anticipate moving in the next five years. If you anticipate any life situation that may prompt you to move in the next few years, paying points for a lower rate may not make sense.

Ask for Comparisons Showing Total Costs
Your mortgage should really operate as a financial instrument to build long-term wealth. When considering making a change, ask your mortgage professional to lay the facts out for you. By having the ability to compare options, you can make the decision that will help you build long-term financial wealth.

If you would like to know whether the time is right for you to act, call the professional that supplied you with this copy of YOU Magazine. Interest rates are near all-time lows and with the right information, your mortgage professional can help you determine if doing something now will benefit you.