Client email this morning:
Can I get a quote without buying points? For reference, this is what we were loosely quoted from our loan officer, and I think it was a bad day to do it in general:
“Hey XXXX
Here are the different rates/payments with a conforming conventional loan and FHA. I’ll show what each rate would be with a 1 point buy down and without any points:
FHA: with 1 point- 5.999% $1949 P&I payment
FHA: with no points-6.75% $2099 P&I payment
Conf/conv.: 1 point- 6.875% $2013 P&I payment
Conf/conv: no points- 7.5% $2139 P&I payment”
I roll my eyes, but only my cat can see me. Benefits of working from home.
First of all, those rates are cringy.
Secondly.. That loan officer should know better than to quote rates without a breakdown, and without APR. The client might assume that an FHA loan is the better option in their scenario, and it’s really not. It also makes it hard for the client to navigate the process of comparing mortgage companies. Effectively deterring people from shopping around.
I know it’s hard to know what to ask for, especially when you’re a first time homebuyer. So I’ll make it easy for you.
Here are 10 things you need to know when shopping for the best mortgage interest rate:
- Interest rate pricing fluctuates with market conditions. Just say you want the pricing of the day. Then give the nice loan officer the details: type of transaction (purchase or refinance), type of property and number of units, type of occupancy (primary residence, investment or second home), purchase price, down payment and estimated credit score.
- If they ask you to fill an application out before they can quote you, politely decline. Tell them you understand that a different credit score can change the numbers, but to use your estimate. A credit pull is not needed for one to disclose their interest rates, don’t let anyone tell you otherwise.
- Be honest about shopping around for a mortgage, and ask for the best price up front. Beware of loan officers offering to price match. While it may be possible with proper documentation, most times they know they’re overcharging. They just want a chance at keeping your business when they get caught with their hand in the cookie jar. Don’t reward the industry BS.
- Pay attention to response times. A lot of loan officers tend to “ghost” their clients after the application is received, and only be in touch when they get around to it. If they’re not responsive during the quoting process, imagine needing them during the actual loan process. Overpriced mortgage companies might weed themselves out on step #3 and ghost you when you mention “shopping”. If you don’t hear back, it’s not you, it’s them.
- You should be able to narrow it down to 2 or 3 loan officers once receiving your quotes. To compare apples to apples, ask them all to quote you on a specific rate that of your choosing. Give them a day notice if needed, so all the quotes come in the same day. “Please quote me on x% tomorrow morning when the markets open”. Makes you sound like you know what you’re talking about.
- Focus on the lender charges on each quote (discount points or origination charges). If it’s a Conventional loan with less than 20% down, also look at the monthly private mortgage insurance premium differences. Disregard everything else – those are third party and pre-paid fees, outside the lender’s control.
- Scan the quotes for junk fees. Administration, underwriting, doc prep, processing fees – these can potentially be waived. Or considered a warning flag.
- Ask ALL the questions you need, and don’t feel bad for it. Get updated quotes as you need them – it’s not that much work for a loan officer.
- Don’t forget to check on turn times. How long will it take to get the deal done? I can close most purchase deals in two weeks, but some lenders still ask for 30 or 45 days. That won’t give you an edge when you’re competing in a multiple offer situation.
- Last but not least, be very wary of giving your information to websites that claim they’ll shop around for you. They will just sell your information to the highest bidder, and you’ll get flooded with calls. A better use is to give them the phone number of a person that really annoys you, and see what happens..
If you ever find yourself in a situation where you’re not sure how to proceed, send me an email.
I’m always happy to help, and to share my 10 years of insight of the industry. [email protected]
