Rate shopping to select who will be assisting you with your next mortgage is similar to playing “liars poker”. The Loan Originator who is the most successful at bluffing wins. The fact is, unless you’re locking in the rate at the moment you’re shopping, you don’t have that rate. It’s a rate quote–that’s all. Mortgage rates change throughout the day. They are based on mortgage backed securities: bonds. Some lenders I work with offer “live pricing” and others issue rate sheets; sometimes we can have several rate sheets offered by a lender during one day.
So if you call Loan Originator “A” on Thursday morning for a rate quote, Loan Originator “B” on Thursday evening and then Loan Originator “C” on Friday; assuming they all price their loans equally (all make the same amount of money on your mortgage) you could receive three different rates. This is assuming that the LOs are all cut from the same cloth. What if the three rates you’re shopping are with three different types of Loan Originator?
Loan Originator “A” talks a great talk…however when you have questions on your mortgage, they’re on the golf course or just out of reach…maybe they just are a “part timer”. You deal with the processor once you’re in transaction or just never hear from them until closing. Loan Originator “A” does not dedicate any time or effort to staying up to date on program changes, guidelines or new products. “A” does not consider a mortgage plan or care if to stay in touch with you after your mortgage closes. “A” too busy quoting the lowest rate to their next transaction.
Loan Originator “B” may not be as polished as “A” however, “B” is equipped with knowledge and many resources for your mortgage. “B” wants to make sure that borrowers understand their mortgage and arrive at the signing table feeling comfortable with such a large and serious transaction. “B” reviews the settlement statement before the borrowers see to make sure that it actually matches the Good Faith Estimate “B” provided to the borrowers. Loan Originator B cares more about establishing a long term relationship with their clients so they will continue to rely on “B” for their mortgage and financial needs beyond when the transaction is closed.
Loan Originator “C” is slippery smooth. “C” does not have all the programs available but will cram borrowers into what they do have…they don’t want to miss a buck. “C” will sneak in a prepay to pad C’s pockets…too bad the borrower will not discover it until they’re at escrow and 90% of them will proceed with the mortgage anyhow. And if you don’t qualify for your mortgage, “C” will find a way to get you approved for a loan you cannot afford at any cost. “C” will claim to beat any rate and the offers seem too good to be true. Loan Originator “C” may be a gambler, too…even if you think your rate is locked, they may be playing to market hoping to make some extra dough on the back end.
You can also have three great LOs, what I like to call Mortgage Professionals, but they work for three different types of mortgage companies such as a bank, broker, correspondent lender or credit union. This can impact your rate, available mortgage programs and what their specific procedures are. Most importantly is the caliber of the individual. If a Mortgage Professional does not have a specific program available, such as FHA, they will be honest with the borrower and let them know instead of “selling” a different program so they can be compensated.
There is so much more to your mortgage than the rate alone. If you like to gamble, than go ahead an make your decision about the largest and important investment you may make based on a rate that you don’t even have unless it is locked. Your Good Faith Estimate is no guarantee of rate or closing costs.
If gambling is not your style (it’s certainly not mine), then I suggest researching the person and company who will be providing your mortgage strategy, helping select your product and secure your rate. If you’re done your homework, a competitive rate will be included automatically…it’s in the cards.
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Rhonda – What a great concept to post about and better yet…so true!!!
Hey Tony, thanks so much for visiting! When people select their mortgage by a rate they don’t even know whether or not they’ll receive it, it drives me crazy…as you can tell!
Excellent!
Rhonda, I’d like to recommend this article to a friend of mine for republishing in her client newsletter. She is an out of state Realtor. Would you be willing to let her use your article (with full credit to you of course)?
Of course! Will your friend please send me a copy of the newsletter? I’m very flattered, Mark.
Thanks Rhonda, I’ll get the info to you. This will probably go in the November Newsletter. I’ll keep you posted. 🙂
With all due respect, how the heck is someone supposed to research various loan officers and companies? I know a few real estate agents – just acquaintances. I’m sure they would make a referral, but what basis would I have to trust it? I could ask neighbors and friends who they’ve used…but let’s say a loan officer satisfies 8 of 10 customers, an atrocious satisfaction rate. What are the chances I would discover this from talking to one customer?
My point is, there are really no resources for an unbiased and valid comparison of loan officers. There’s just the random referral of friends, neighbors, and acquaintances, who may steer you clear of someone they had a bad experience with, but couldn’t tell you anything about the agent’s service to other customers.
Vincent, one question to ask people when your searching for a LO is “was the rate competitive”. Truthly many may not know as rates change throughout the day. If you lock at 9am in the morning, by 11am rates may be better or worse.
The point is, if you select a LO by the rate they’ve provided you on the GFE, it is like playing liars poker. The rate doesn’t mean anything until the loan is locked. Even then, the LO may be a gambler betting that rates improve and they’ll pocket more coin.
It is challenging to find a good balance of a LO who will provide you with a competitive rate and excellent service. I’m happy to review other lenders GFE’s (time permitting) or there is another service called “offer angel” (I’ve not tried it yet) where consumers can compare.
Unless your LO honors the GFE closing costs (rates are not guaranteed until the loan is locked) it won’t matter.
You can chose to work with whoever is quoting the lowest rate, you’ve might have made a suckers bet.
I wish my industry wasn’t this way and I’m hopeful that with our licensing and 50% less LOs that it is better. (Except LO’s who work for the big banks are not held to the same standards in Washington State as they are not licensed).
Good luck.
Vincent, I should have gave the the address to offer angel. I believe it’s http://www.offerangel.com or you can try “googling” them.