How to successfully shop for a mortgage

Within minutes of applying for a mortgage, your phone may start blowing up with texts and spam calls from other mortgage companies. They’re all promising a lower rate and a better deal. You’re probably wondering – are they for real? If you’re like me, you want to make sure you’re getting the best deal. You also want to be confident that you’re making the right choice in the people and companies you are working with.

Shopping for a mortgage isn’t the same as shopping for shoes online. There’s a lot of fine print, moving parts, and other things to consider besides just the interest rate. Let me show you a few things about how mortgages work that will hopefully help with this decision.

The Lowest Rate is Not Always the Best Deal

Every mortgage rate quote is a custom quote. There are a few reasons for this:

• There is not one rate that everybody gets; there is a whole schedule of interest rates, ranging from high to low, and it changes every day.
• Differences in credit score, down payment, debt ratio, loan amount, property type, location, and some other factors all make a difference in where your rate will fall on the scale.
• Each borrower has the option to “pay points” to get a lower rate, which means paying higher closing costs up-front to get a permanently lower interest rate.

Role of the Loan Officer

Your loan officer will help structure your financing to fit your needs, ensuring you’re comfortable with both the monthly payment and the total amount you need to bring to the closing. For example:

• If your goal is to get into a house with as little money out of pocket as possible, opt not to pay any points.
• Consider down payment assistance programs, which may come with higher interest rates but lower upfront costs.

Online Rates

Online rates usually fall into one of two categories, and both of them can be wildly inaccurate:

• Marketing Rates are designed to attract calls. Lenders who post rates online are looking to make their phone ring. Mortgages all pretty much come from the same place. Mortgage-backed securities trade like the stock market, causing rates to change daily. This makes it easy for companies to quote lower-than-market rates to draw you in, then claim the rate is no longer available once they have you on their hook.
• Averages. Keep in mind that an "average" means some people are paying more and some are paying less. Where you fall on that scale can be a result of any of the factors listed above, including your loan type, credit score and whether or not you are paying discount points. Make sure to notice the average amount of points customers are paying next to the weekly average.

Trust in Your Lender

It’s important to deal with a lender you trust. Referrals from friends, family, or trusted financial advisors provide accountability. As a lender with over 20 years of experience, my business is heavily based on referrals. My reputation matters, and if I engaged in bait-and-switch tactics, word would get around, and my business would suffer.

Consider the Full Picture

While it’s possible for another company to offer a lower rate, there are other factors to consider:

• Everyone’s situation is different, requiring effort, creativity, and knowledge of lending guidelines.
• The loan process can be turbulent, and you want a competent lender to navigate unexpected situations.
• Deadlines are crucial when buying a house. Ensure your lender won’t drop the ball, causing you to miss important timeframes.

Evaluating Your Lender

Ask yourself:

• Is the lender patient in answering your questions?
• Are they willing to meet in person and answer calls?
• Are they clear about the costs of different options?
• Do you feel comfortable asking questions?
• Do they make you feel pressured or rushed?

Locking in Your Rate

Once you have an accepted contract, discuss locking in your rate with your lender. My team provides full access to the rate board and discusses the options with you. This ensures you choose the rate that best fits your needs.

Conclusion

Ultimately, structure your loan so you’re comfortable with the total dollars out of pocket at closing and your monthly payment. Ensure you have enough money to close the deal and can live with the monthly payment going forward.