Education is the Only Sure Consumer Protection
I really enjoy reading Bill's blogs because he is such a great writer. He is one of the best loan officers in the industry. You can see he is very passionate about his subject. I also, love his brand! The FHA guru is cool! ;-)
Education is the Only Sure Consumer Protection
Realtors, We Must Teach Your Clients to Properly Shop for Rates.
Life is better for all concerned when Your buyers know how to select competent lendersFIRST, Two VERY IMPORTANT Rules:
- Mortgage Rates, Points and Lender Fees are interdependent parts of every rate quote. If any part is missing the Quote is worthless.
- Do not fall for "I must have your credit report and financial information before I can quote you a my rate" because this an absolutely outrageous lie. Move to the next lender no matter whojust lied to you. In my opinion this is predatory lending.
Important Mortgage Rate Shopping Tips.
Know your credit score before you begin shopping. Loan availability and the cost of your loan depend on your credit score. Most conventional lenders require a 720, or better, mid score, above 80% loan to value, and most FHA and VA lenders require a minimum 620 to 640 mid credit score. Do not allow any lender to run your credit until You select them as your lender. Credit reports run by several lenders will lower you credit score. If you do not already know your credit score, there are several Internet companies that will provide a free credit report and FICO scores for an additional Fee.
VERY IMPORTANT, Shop all lenders on the same day and time period. Mortgage Rates change every day, sometimes several times a day.
Insist that each lender price the exact same Rate. You pick a rate to shop. The rate does not really matter as long as it is currently available because you are looking for lender for the lowest total cost for the rate you are shopping. Once you establish the lowest cost lender you can zero in on a rate-point-fee combination that works best for your situation.
All lenders offer a range of rates and points for each of their loan types. Rate and points are interrelated, lower mortgage rates cost more points... higher rates cost less points. Create a "Rate Baseline" by asking each lender for the same mortgage rate and then compare their points and fees for that rate.
Shop for a specific loan type, because each type is priced differently. i.e: FHA, VA and Conventional loans, conforming and jumbo have different mortgage rates. Insist that each lender quote rates for the same loan type. Some lenders may present you with other options but insist they also provide a quote for the loan you are shopping for to establish a pricing base line.
Shop each lender for the same mortgage rate lock time period. You must ask every lender to tell you the lock period for the rate they are quoting. Mortgage Rates increase incrementally for each longer lock periods. I suggest shopping rates for a 30-day lock period. Lock periods can vary but most lenders provide locks for 15, 30 and 45 days. Some lenders quote their 15 day, least expensive price, which is not available until after the loan is approved. If you find a lender initially quoting a 15-day rate, it would prudent to eliminate that lender from your short list.
If the Loan to Value is greater than 90% and the spread between the interest rate and APR are less than 0.75% the APR has been misstated.
Insist the lender provide a detailed Good Faith Estimate before you complete an application. You have a right to know to know the price of the loan before you apply. A few lenders, even some large well-known lenders, falsely claim rates cannot be quoted until they have all your personal information. This is an absolutely bogus sales technique, these lenders know that borrowers do not want their personal information spread all over town and their credit score lowered by several credit reports AND they know once a borrower provides their personal information they are likely to stop shopping. Do not apply to any lender before you receive a Good Faith Estimate.
Will the lender allow you to lock your mortgage rate today? You should be able to lock your rate on the day you submit your signed application as long as the signed application is received by the lender prior to 3:00 PM PT. Most lenders stop locking loans at 4:00 PM PT this time is not universal so check with each lender for their lock cutoff. I am not necessarily advocating an immediate lock unless market conditions indicate it is needed. By allowing the lender think the borrower may immeditally lock the lender may provide a more accurate quote.
Bill Ladewig, Your FHA Guru
800.664.SAVE (7283)
Current Rates: Rates
October, 2009 San Diego Mortgage Rate Shopping tips
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