I get calls all the time asking " what is your rate" , I am sure everyone in the mortgage business get's these calls daily as I do.
People who are calling every lender in the local phone book or shopping the internet should be educated on how to shop for a interest rate before they start dialing every mortgage company looking for the lowest rate.
People need to ask every lender they talk to the same questions or they may get different rates for the same products. Compare apples to apples. I have a list of about 10 questions I offer shoppers to ask each lender they contact to make sure they are shopping apples to apples.
We need to start with some questions before we can quote a rate -
"Prescription before diagnosis is malpractice, You don't want me to give you the wrong answer, do you?"
Before a borrower starts to rate shop should always have a sales contract and closing date set, without a set date for closing and a sales contract I can not quote a solid rate. Borrowers should understand that rates change daily and sometimes a few times a day based on the bond market, also understand the length of time you lock a rate in for will be a factor to determine the set rate.
Here are some questions I ask my rate shoppers:
- Now, There are two kinds of rates - quoted rates and real rates. Which would you like? Many lender will give a low ball rate just to try and win over a customer, these rates will either never be the actual rate at closing or there will be some hefty points to pay, some lender will tell you there are NO POINTS and call the fees something else such as; Broker Fees,Discount Fees,Lock In Fee etc. they are really POINTS to lower the rate.Lenders will call these masked points something else to make you think you are getting a NO POINT super low rate! So ask, WHAT IS THE TOTAL LENDERS COSTS for this loan at this rate or ask for the APR.
- Would you like the lowest rate or the lowest rate over time? There are hundreds of mortgage programs available and not everyone fit's into the same product, I like to spend about 10 minutes to gather the borrowers goals and objectives this way I can call them back with some tailored fit mortgage programs to meet their long and short term goals. (not everyone fit's a size 9 black shoe)
- How Much Money or Percentage of the sales price are you thinking of putting down on your purchase. This is another factor in quoting rates, for example a 100% financed loan with a 690 FICO score may be say 6.625% but the same person who borrows 90% may bet a rate of 6.25%. (less risk to the lender = better rate to the borrower)
- Do Know your Credit Score?Some lenders will throw a rate out there not even knowing if they borrower even has good enough credit to qualify for that rate. This can cause some shock to the borrower when the lender runs credit and finds out the borrower has a 600 FICO and the rate is not 6.25% but 7.5%.
- How Long Do You Plan On Being In This Home? This is a big factor in helping fit the borrower into the right program at the best mortgage rate for them.
- Do you qualify for a VA Loan? Many lenders don't ask. VA Mortgage Loans are great tools for buyers and even people who are refinancing, 100% financing, no MI and very good rates are offered with VA Loans. If you are a Vet and qualify for a VA Loan ask about a VA Mortgage.
There are no magic hidden rates out there, we all get the wholesale rates from the same funding sources so if someone gives a rate that seems too good to be true, it is!
Leo Namiot - Benchmark Mortgage - Connecticut
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