Most consumers only know how to shop for a mortgage in one fashion: call a lender, ask about the rate and points, compare that with 1 to 3 other quotes, and then choose the lender with best rate. While I have many reasons to not choose a lender based just on rate, this dialogue is meant to differentiate between shopping for the best rate and shopping for the best value. In fact, just shopping for the best rate ends up many times costing the consumer more. Let me explain…
Real value is a loan officer who actively manages each loan by structuring it correctly the first time, and paying attention to market movement that will affect the interest rate of their borrowers. The problem is that many loan officers can’t give you a proper explanation of what moves interest rates, not to mention a lack of creativity to prescribe the best and most cost-effective loan.
Knowing when to lock in your loan is always better than just finding the lowest rate on any given day. I can’t tell you how many times people think they saved .25 points one day, but end up paying more because the loan officer made a mistake.
Here are some of the most common mistakes loan officers make:
• Missing positive market trends. Locking in when a loan officer says so, with no advice or explanation, should be a red flag. What if the markets are improving? Do you want to miss out on that?
• Missing negative market trends. It is common for sub-par loan officers to say to their borrowers, “I’m sorry... rates changed”, because they aren’t paying attention. Ask around, this happens all the time.
• Getting locked in for 45 or 60 days, when a short-term lock would save you another .125% to .25% in points.
•Locking in a loan on FRIDAY, or before a long holiday weekend. I call this “fudge Friday”.
•Locking in with the wrong loan structure. The wrong kind of loan can cost you unnecessary points and fees, and compound the mistake.
At the end of the day, there will be more value in using mortgage professional who not only offers a competitive rate, but is also experienced, well-respected, and most importantly, knows how to manage your mortgage correctly, from start to finish, and then after. Just shopping for the best rate is NOT always indicative of ‘good value’.
How do you find the right loan officer? Read reviews. A good loan officer usually has reviews of their clients posted online (My Reviews). Do some research, but I warn you—really good loan officers are at a premium. When you find one, I promise you’ll be better off in the end—not to mention, you won’t lose your mind during the process.
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