Comparing Rates?---Things To Consider. Since the beginning of time, borrowers have been conditioned to believe that all 30 year mortgages are created equal---that mortgages are a true commodity; and therefore, should be shopped on price….and price alone. It’s the reason why virtually every mortgage conversation eventual comes to—“What is your rate?” And “What are the points and lender fees?” After years of trying to explain to borrowers that there should be so many other considerations to choosing what lender to do business with (like turn times, easy and frequency of communication, reputation for competency and integrity, sound advice as to when to lock, and more), I am going to set aside my soapbox convictions, and give all the borrowers out there some food for thought…. 1. Talking to a loan officer over the phone or online is like Internet dating. The profiles are likely exaggerated. In order to get you interested in getting started, many lenders tell white lies about rates. Why? Because you can’t lock them in anyway. I can’t even tell you how often lenders are accused of this “bait and switch” move. It’s at that first date, or later, when the ugly truth comes out…you were misled…and often it’s too late. This one reality is why getting a referral to a loan officer is much better than nameless, in-bound telemarketing call centers. You need a relationship with a real person, not your computer keyboard. 2 .As much as the government has tried to put controls in place to make comparisons between one lender’s Good Faith Estimate and that of another lender, there is still wiggle room when it comes to fees and closing costs. This makes the apples-to-apples approach difficult for non-mortgage people. Understand that a majority of your costs are outside the control of your lender, as the fees go to third-parties (appraisal, title insurance, title charges, NYS Mortgage Tax, recording fees, etc.). Lenders are charged to estimate many costs, some overestimate, others underestimate- either way, the charges are what they are and should not be used to compare the lender (because they have no impact on actual charges). 3. Lastly, when shopping for a mortgage rate, you need to know what factors are considered. Anyone who quotes a rate without taking all these factors into their offer, is either incompetent or deceitful. • FICO Score. Logic says…lower scores equal increased risk for the lender. More risk translates into higher rates and/or fees. We will typically use the middle score of the borrower with the lowest score. Did the person you talk to run tri-merged reports for every borrower? • Did you discuss the property? Rates are different if you buy a one-family compared to a co-op, a two family, three-family or four family. • Will you be going FHA or Conventional or VA? All have different pricing structure (as well as Mortgage Insurance considerations that can significantly affect your payment in the short and long term). • How about your loan amount? Conventional loans for a one-family under $417,000 price better than loans between $417,000 and $625,000. Loans over $625,000 price with an entirely different metrics. • How about the Lock Period? Loans with short lock periods (15 days or less) are less risky for lenders, say than locks for 60 days or more. Many lenders quote 15 day pricing when you are thinking the lock will be good until closing (2-3 months later). The bottom line is my advice is when choosing a lender, know there is very little variation in pricing these days when you are dealing with people of integrity. (We all sell our loans to the same places.) Getting a referral from your real estate agent, your attorney, a co-worker or family member who has EXPERIENCE with a particular individual gives you the best chance for a stress-free mortgage experience- one in which you are communicated with, informed about options, advised by a knowledgeable professional, and not treated like a bunch of numbers and documents. Written by Dean Hartman
Posted on: Mon, 14 Jul 2014 18:51:28 +0000
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