Shopping for the best price is something we all do whether for a car, a pair of shoes, a new home and, very likely, a mortgage for that new home!
For potential homebuyers the ultimate endgame is to find the property of their dreams and the financing that will allow them to actually make the purchase.
Mortgage lenders, like basically every other profession, are not all the same and in fact the one that you choose to use can make all of the difference between a good experience and a runaround that ultimately may lead to another mortgage originator needing to be found.
And if that becomes the case where months have gone by and your mortgage broker tells you that he or she can’t get the deal done, time will typically be of the essence in terms of the purchase contract the buyer has signed.
So what is it that brings me to think about this topic today? It was an article speaking to the fact that when borrowers shop their mortgage around, some amount of savings is possible:
‘…Borrowers are likely to save an average of $1,500 over the life of a $250,000 loan if they compare rate quotes between lenders according to Freddie Mac’s latest Insight report for April. If they compare more than two quotes, their likelihood of saving more rises, the report indicated.
The report found that 80 percent of borrowers who obtained one additional rate quote while shopping for a mortgage could save between $966 and $2,086 over the life of their loan. If they received five rate quotes, the expected savings increased to $2,914, with 80 percent of those borrowers saving between $2,089 and $3,904…‘ (Source)
So Is Rate Ultimately Going To Be The Key Component In The Decision-Making Process When You Choose Your Mortgage Professional, The Track Record Of The Mortgage Professional Or A Little Bit Of Both?
Well truth-be-told if you are looking at a 1% or 100 basis point difference between lenders then one of them is going to be way out of the market and likely should be avoided.
One lender may merely be posting a low rate rate unattainable for the majority of borrowers that serves as a hook to get people to call or, the other has a rate that is too high representing a lender more interested in their own pocket than the borrowers.
Is one lender online only and therefore won’t necessarily serve as a strong advocate in the process of underwriting your loan?
Or is there an 1/8 % or 1/4% difference in rates from two lenders with good reputations that also have similar fees that go into your costs?
Is one a 1/4% lower in rate but is going to nickel and dime you with fees?
When ‘pulling the trigger’ on an offer for a house there are many decisions including choosing the mortgage lender to use at a time of maximum stress.
So, therefore, the mortgage lender/broker is a decision that should be made at the beginning of the home buying process when the homebuyer is going to get pre-approved for some amount of mortgage that they can afford.
The Three R’s Of Mortgage Origination!
As it is with so many expenditures we make in life it is critical to make an apples to apples comparison between two prices. Buying a car comes to mind in that regard but, so too does obtaining a mortgage!
The Three R’s
- Rate: Make sure it is reasonable and in the vicinity of where it should be for a given loan term (i.e. 15 or 30 year mortgage), downpayment amount, borrower credit quality, etc.,
- Reputation: Make sure the lender has a good reputation as one with fair underwriting that gets deals closed in a timely fashion,
- Referral: Maybe the most important of the three, speak to people you know that have gone through the process having had a good experience. Then interview some who come highly recommended as strong advocates for the potential borrower, are good communicators and most of all who have a reputation for getting loans closed in a timely manner and at the terms that initially discussed and promised.
There is of course other criteria that go into the decision of choosing a lender, but as a quick overview of the process the Three R’s may provide a good beginning!
Michael Haltman, President
Hallmark Abstract Service
Phone: (646) 741-6101