Me - "What kind of payment do you want and or feel comfortable with?"
Consumer - "I want that rate of 5.5%."
Me - "Your payment is going to be $2,500 based on that $200,000 house ."
Consumer - "That's too much. Why is it so much?"
Me - "Sir, it would be better if I asked you a few questions first. Again, what payment would you feel comfortable with? 2nd, what are your goals? (I would go into more detail at this time) These are 2 great questions that will allow me to get to know more about you, so I can tailor the best possible loan for you. Possibly giving you a few different options."
Consumer - "But I want that low rate that my neighbor got last month!"
Me - "Sir, there are just too many variables in regards to your statement. Too many unknowns. First off, that was a month ago, rates can change daily. Second, how many points did he pay and how much did he put down? How much did he come to the closing table with? What were his credit scores?"
Consumer - "I don't know. My credit is good because my credit score is a 600. And I don't want to put much down."
Me - "Sir, if you can just allow me to ask those questions again, I will be able to educate you on what I am trying to accomplish for you and be able to give you a detailed breakdown of how this works. And what you just supplied to me still doesn't help me. Can we start over? Do you trust me, that I want to help you? If you don't have trust and faith in me, then we won't be able to move forward."
Consumer - "Well, my best friend has used you several times and says he trusts you. And I trust him, so I guess so. Okay, what do you need again?"
Many people in our industry have been told to sell payment, not rate. If you think about it, it makes sense. Too many people get hung up on trying to get the lower rate. Sometimes in your mind, a lower rate means that you can afford that payment. When in reality, you should start with what payment you can afford.
Another issue is that some consumers try to out do their neighbors and friends. It becomes bragging rights, in regards to who got the best deal. Unless you both pull out your credit reports, you HUD-1 settlement sheet (to see how much you paid), and bought the exact same house; this still won't tell you who got the best deal.
Last, each consumer is different. There is not one person out there that will ever have the exact same scenario as the next. And 2 months down the road, who can say that the rates would be the same or that they are the same.
Trust the professional that you decide to go with. Always ask questions and if you don't understand something, don't hesitate to ask. "No question is a bad question."
For some other things to keep in mind while comparing, please read :
Shoppers that shop themselves right out of the market…….
The Myths about ZERO point mortgages instead of paying points upfront……
First Time Homebuyers & what to look for in a Mortgage Lender before you apply or make application; may it be buying, or refinancing. (Also, info for people refinancing or that aren’t first time homebuyers.)
What inspired me to write this post was a comment that David A. Podgursky made in another blog of mine, stating that so many people shop rate and not payment.
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When I get a potential client and I refer them to a loan officer I tell them to make sure and tell the LO what they want to spend per month for their monthly payment. I tell them that if they have super duper credit that anyone can qualify for that 500k home but do they want to pay that monthly payment? I also let them know that after the LO pulls their credit and they talk about what kind of loan program best suits them the LO will let them know what the rate is. Okay Jeff....did I do good? If you can add anything to that let me know....