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Getting the lowest rate
Don't waste your time
trying to get the absolute lowest rate in the market!
Instead, focus on getting a good rate with a company that you can trust on
delivering promised rates. There are just too many stories of consumers who
were promised an incredibly low rate only to find out that rates/fees were
different at closing. Getting the lowest rate is meaningless if you do not
close escrow with that rate! If price was the only consideration, then everyone
would be driving Yugos!
Here is a list of things to do when shopping for a rate:
- Get a good-faith estimate of closing costs in writing. When comparing
lenders, pay close attention to the loan fees on the estimate. Other fees such
as title charges and government recording-fees are independent of the loan, and
so are irrelevant when comparing lenders. These are normally paid to companies
other than the lenders. Compare the loan fees, points and the interest rate.
- Find out what the APR on the loan is. Use this as a guideline to shop for
loans. Unfortunately, APR is not well-defined, so different lenders may
calculate the APR differently. You cannot depend solely on the APR.
Check out this
article, which explains APR in detail
- Find out how long the rate is valid for. A company might quote you a really
low rate on a 10-day lock. This means you have to close your loan within 10
days. Most lenders will not let you lock in a 10-day lock unless your loan is
already approved. Always ask for at least a 30-day lock.
- When you lock in your interest rate, get the rate, the points and the
length of the lock in writing.
- If you are locking in an adjustable loan, make sure you know the margin,
the adjustment caps and the life cap. If you are unsure about these terms check
out our reference desk.
- If you do business with companies who publish rates on the Internet,
monitor their rates over time. Some companies may have low rates one week and
higher rates the following week. Unless you are locking your rate on
application, it is a good idea to work with companies that have consistent
pricing strategies.
Should you work with 2
lending sources?
Loan officers and mortgage brokers work hard to earn their
money––just like you do. They spend many hours trying to make your
deal go through and deserve to be compensated for that effort. Nothing is more
frustrating in a loan officer's life than to find out that she has been
"double-apped" (a borrower has filed two applications with two
different lenders).
If you do work with two lenders––one of them is going to take a
loss, since they do not make any money until you close. It is only fair that
you tell them up-front that you are working with two lenders and that you may
not close the loan with them. You may offer to compensate the lender that you
do not close a loan with. For example, you may offer to pay the loan processing
fee that is charged by that lender.
Working with two lenders can be like having two wives––hard and
time-consuming. One lender might have a better rate on a given day and you
decide to lock with them, and on the next day the other lender may have a
better rate! You may also have additional costs––such as duplicate
credit report fees, appraisal fees, etc.
In most cases it may be better to work with a lender or broker that you
trust and feel comfortable with. Working with multiple lenders will only raise
costs for everyone––since the lender that takes a loss will have to
pass this on to other customers.
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