Insider Tips Most Loan Officer’s Don’t Know

Tips for Home Mortgage Rate Shopping And Avoiding Getting Ripped-off: 

These tips come from 24 years of Mortgage Banking and Brokering experience.  If you use them, you will save a lot of money and avoid being ripped-off.  However, as you will soon find out, shopping for home mortgage quotes can be very tedious and frustrating.  Use my tips and you won't overpay for your interest rate or fall prey to a greedy Loan Officer (LO).

Tip #1:  Always Shop For Home Mortgage Rates

Don't just accept a Realtor or Builder referral to apply through a preferred lending company.

Loan Officers that work off of a referral network of Realtors and Builders don't have to have competitive quotes because they have a steady stream of people referred to them and those people don't shop.  To save thousands of dollars, shop around, get the lowest cost deal, then if you are inclined, approach the "preferred" Loan Officer (LO) you were referred to and ask him to match the quote.

If you apply through a preferred lending company without shopping, you will pay hundreds or even thousands of dollars in additional costs. 

Tip #2:  Call For Quotes After 11:00 a.m. Eastern Time

Home Mortgage rate quotes change each day.  The previous day's quotes typically expire by 8:30 a.m. the next morning and generally, the new quotes are published each day by 11:00 a.m. Eastern time.  This varies from company to company.  To make sure you are getting quotes from the current day and not a mixture of quotes from the previous day from some companies and the current quotes from others, always do your shopping after 11:00 a.m. Eastern time.

Get your quotes after 11:00 a.m. Eastern time.

Sometimes the quotes change midday due to a volatile bond market.  When this happens, some companies will adjust the Discount Points for their quotes in accordance with the new bond prices and publish new quotes for that day.  Other Lenders may continue to honor their morning quotes.

Tip#3:  Always Tell The Loan Officer You Are Prepared To Submit An Application NOW  

If you are buying a home, tell the LO you are shopping and you have a "ratified contract" to purchase a house.  Tell him you intend to make a decision and Lock-In a on that day.  If he asks you how his quotes compare to the other companies, tell him he's the first person you've called.  If you are refinancing, tell the LO you are ready to apply for a refinance today.  If you don't tell him that, he may provide a fake quote.

LOs expect you will talk to other lenders and there is always a company offering better quotes.  The only way he can be sure for you to call him back is to give you a fake quote that appears to be the lowest.  He's expecting you will shop for several days and figures you will call him back in a day or two because he provided a low bogus quote.  Since quotes change daily and are subject to change at any time, he's not concerned about giving you a fake quote.  He just wants you to call him back.

How will you compare quotes if you don't know which quotes are real and which are part of a bait and switch plan?  The only way to ensure getting real information is to box in a Loan Officer by making him think you are ready to Lock-In immediately.

Tip#4:  Ask For The Total Points And The Total Fees

When you call a Lender, ask for the "Total Points" (Discount Pts., Loan Origination Fee, Broker Pts.) for each quote.  Some lenders will only quote the Discount Points and intentionally leave out their Loan Origination Fee.  You won't find out about the 1.00 Point Loan Origination Fee until you apply for the loan and see it on your Good Faith Estimate of Closing Costs.  By that time, the LO expects you will accept it because he already has your application and pulled your credit report.  In addition, Brokers sometimes neglect to mention their Broker Fee.

When you are quoted the Total Points, specifically ask them if there is an additional Loan Origination Fee or Broker Fee being charged.  You truly have to nail this down when you talk to a LO.

Some lenders do not charge a Loan Origination Fee and often times, brokers do not charge a fee.

Also, ask for a list of ALL other fees that will appear on the Good Faith Estimate that you will be paying to the Lender or Broker.  Make sure they include their Credit Report and Appraisal Fees.  Some lenders charge one lump sum fee and that includes the Credit Report and Appraisal Fees while other lenders will itemize each fee.  Keep it simple and ask for all fees, including the cost of the credit report and appraisal fees.

Don't include Transfer Taxes, Title Company, Attorney Fees or Escrows.  A lender will estimate these on your Good Faith Estimate, but these charges are not related to costs associated with a quote.  The amount required for your escrow account will not change from lender to lender and Title Company and Attorney Fees are not being charged by the lender.  Don't include them in your comparison.

Tip#5:  Always Confirm The Lock Period When Getting A Quote

If you are buying a home and you need 60 days to close, make sure you specifically request quotes with a 60 Day Lock period.  Some LOs will provide quotes with 15 Day or 30 Day Lock periods because the Discount Points for shorter lock periods are lower than they are for locks with longer periods.  Quoting a 15 Day lock period obviously gives that LO an unfair edge.  It's also a waste of your time because the quote isn't real if you can't settle on your loan within 15 days.  Always specify a 60 Day Lock-In if you are buying a home.  Ask for 45 Days if you are refinancing, but you may be able to get it done within 30 days if you are very diligent and call your LO twice a week for a status of your application.

If your lock expires, the lender will re-lock you at the higher of either the original rate or the current rate when you decide to re-lock.  That's a LOSE/LOSE situation for you.  Never let your home mortgage rate lock expire.

Tip#6:  Compute The Dollar Cost Of The Points And Add All Fees

After you've spent some time talking to a bunch of companies, you will have lots of quotes with Points and Fees on a sheet of paper.  First you should compute the dollar cost of the Points (multiply the mtg. amount X the Total Pts. expressed as a percent; For example, multiply $400,000 mtg. amount X .625% if the Pts. are .625).  Then add the dollar cost of the points to the Total Fees.  You can then compare each  lender's Total Cost (dollar cost of the points + all lender related fees) for a given home mortgage rate.  That will show you which Home Mortgage Lender has the lowest cost quotes.

If Mortgage Insurance (MI) is required, ask for the cost per year expressed as a percent and compare it from lender to lender.  Some lenders require different levels of coverage and this will affect your monthly MI payment.  In addition, lenders use several different MI companies and they charge different rates for the same coverage.  The lender will select the MI company.

The cost of MI can vary from lender to lender even though most LOs will say, "We don't determine the MI, Fannie Mae and Freddie Mac do".  Your can just say, "Please humor me and provide the annual cost of the MI expressed as a percent".

You will want to check the quoted percent with what is on your initial application documents and final application documents to make sure the Monthly MI payment isn't higher than what you were quoted.  If it is, get it reduced immediately.  If they won't do that, then ask them to reduce your interest rate by .125% and that should cover the difference.  

If you are getting a government insured mortgage (FHA or VA), you don't have to get into a comparison of the FHA MIP or the VA Funding Fee.  This is a cost you will be paying, however every lender MUST use the same costs, so there is no reason to attempt to compare these costs from lender to lender.

Tip#7:  When You've Found The Lowest Cost Interest  Rate, Apply and Lock The Rate

While you were looking for houses or thinking about refinancing, you may have shopped around and gotten some quotes from lenders and narrowed down your search to the best 5 Lenders or Brokers.  But when it's time to apply for your loan, make sure you update your quotes for the 5 lowest priced lenders.  After you identify the company with the lowest cost rate, call and apply for the loan.  Tell the LO you want to Lock-In your rate and apply NOW.  If the quote has changed since you last updated your quotes, tell the LO you want him to honor the previous quote.  If he won't do it, tell him you may call back.  Then call the next cheapest company on your list.  If that lender tells you the same thing, you can go back to the first company and proceed with the application process.

Before you provide your application information, make sure the LO agrees to provide you with an actual rate lock confirmation via email or fax on the same day you apply for your loan.  When you receive the confirmation, check it and make sure you are Locked-In for the number of required days (30, 45 or 60), with the correct Loan Type (30 Year Fixed, 15 Year Fixed, etc.), with the correct Total Points quoted.  It's normal for a lender to require you to apply over the phone before they will Lock-In your Home Mortgage Rate.

Watch out for tricks such as a 30 Year Fixed Rate loan being substituted for an Adjustable Rate Mortgage (ARM) that's "Amortized for 30 Years and Fixed for 5 Years".

TIP#8:  Never Float The Rate

If the LO thinks you might be inclined to FLOAT your Rate and Points, he may say, "I think the rates are going to be coming down, so you might want to FLOAT".  Remember this, never FLOAT the rate or points.  Never.  Always Lock-In.  If you FLOAT, and the points for your rate drops, you will only realize the benefit of a small part of that drop in the points, if any at all.  The LO will keep the rest of the savings as a fat commission.

Here's how they increase their commission when you FLOAT.  Originally, the lender quoted 4.875% with 1.00 Total Point when you applied for your loan.  Then 45 days later you called to Lock-In.  Keep in mind that over the 45 day period that you were FLOATING, the actual Points for 4.875% dropped to .50 Points.  So you should have saved .50 Points on your 4.875% rate.  Right?  Wrong!  First, you don't know if his company's points have dropped or by how much they might have dropped.  So, instead of giving you 4.875% for .50 points, the LO tells you his rates have fluctuated a little, but he says it's still 4.875% for 1.00 Total Points.  You are happy because it didn't go up, but the LO is ecstatic because he keeps half of the "overage" you paid.  That overage is .50 points and he splits this with his company.  If the mtg. amount was $400,000, he just earned .25% which is an additional $1,000 commission.  That's not bad for a five minute phone conversation.

If you FLOAT and the discount points increase, you will pay for the increase.  FLOATING is a LOSE/LOSE proposition for you and a WIN/WIN for the Home Mortgage LO.

Some companies quote very low rates and attract lots of applications, but they don't let you Lock-In until 15 Days prior to closing.  If you apply for a loan through a company with that policy, you will get screwed.  When it's time to Lock-In your loan, you will pay an "overage" that will go straight to the LOs pocket.  You will either pay more points for the rate you requested at the time of application or you will get a higher rate.  Either way, you will get screwed and the LO will get a fat overage added to his commission.

Tip#9:  You May Consider Walking Away From Your Application And Apply Somewhere Else

You can walk away from your application.  If you Locked-In and 4 weeks later the rates have improved dramatically and you are kicking yourself because you are locked, consider walking away from your application.  You can do that.

If you are contemplating applying for another loan with another company, consider these things:

1. Do you have time?  Are you supposed to go to settlement in 2 weeks?  Can you get to closing on time with the new company?  If you are refinancing, time is not a concern.  If you have a real estate contract, you need to consider the implications of missing a scheduled settlement date.  How does it affect the sellers or the buyers of your own home?  What about your Landlord if you are renting?  If your real estate contract states, "Time Is Of The Essence" and you miss your settlement date because you cancelled your original application, you could be on the hook for some damages if the seller wishes to pursue them.

2. Did you pay for the real estate appraisal for you first application?  If so, you were likely told to provide a check or pay by credit card for the real estate appraisal.  If that's the case, you are entitled to that appraisal and you can request in writing for it be assigned to your new company.  If the lender or broker didn't collect any money from you at the time of application and you didn't pay for the real estate appraisal, then you are most likely not entitled to have the appraisal assigned to another company.  If you can assign the appraisal, make sure the new lender will accept the assignment of the old appraisal to their company.  If they won't, then this will increase the amount of time you need to process the new application.

3. If you paid a $400 "Application Fee" when you applied for your loan, you may not be entitled to have the first appraisal assigned.  Are you willing to pay for a new appraisal for the second Application?

4. You can apply for 2 loans at the same time, close on the best deal and cancel the other application.

Tip#10:  Get a Final Good Faith Estimate Several Days Before Closing

Get a copy of the Final Good Faith Estimate at least a few days before the scheduled closing day.  Check the Rate, Points, Fees and Monthly MI Premium (if applicable).  Make sure you are getting exactly what you bargained for.  Ask questions if you don't understand something.  Demand that previously undisclosed fees be removed from the Final Good Faith Estimate.  Make sure you get a revised estimate if the LO verbally agrees to make changes.

The day of closing is the wrong time to haggle over discrepancies.

Tip#11:  Schedule Closing For A Weekday Morning

Schedule closing for an early weekday morning.  If the closing papers are wrong, you can still get them revised and close on time.  Don't close if the Rate, Points, Fees or MI premium don't match your Final Good Faith Estimate.  Demand changes to the settlement papers and don't settle.  The Lender or Broker will do whatever they can to close the loan.

Tip#12:  When Paying Off An FHA Mortgage Always Close At The End Of The Month

If you are refinancing or paying off an FHA loan because you are selling your home, make sure your closing is scheduled for the end of the month.  Why?  When an FHA loan is paid off, you have to pay a FULL month of interest for the month which the mtg. is paid-off.  If you close on the first day of the month, you must pay interest for the FULL month.  If you are refinancing, you will pay a full month of interest to the old lender and a full month of interest to the new lender.  If you are purchasing a new home and paying off an FHA Mortgage on the first day of the month, you will pay a full month of interest to the old lender and a full month of interest to your new lender.  Make sure you discuss this with your new Lender.

Most companies are responsible enough to manage your application so you don't end up paying an extra month worth of interest.  However, if they aren't, your final payoff statement will be a lot higher than you expected and the LO may try to gloss over the whole thing because he knows you won't be happy.

Make sure your rate lock is long enough to extend you to the end of the month and that you close at the end of the month.

This situation only applies to FHA mortgages.

*The A.P.R. is the cost of credit on a yearly basis.  The A.P.R. calculates the combined cost of the Interest Rate, Discount Points, MI and other Fees the Lender may charge, excluding Fees paid to third parties such as Appraisers and Credit Reporting Agencies.

**The A.P.R. Change is the change from the previous business day's A.P.R.  Red text represents an increase in the A.P.R. and green text represents a decrease.

The interest rates quoted above are for either a home purchase or rate reduction refinance transaction.  It is assumed the loan amount is $400,000 with an LTV of 80% and the property being financed is owner occupied, detached, single family home.  It is also assumed that the quoted rate can be locked in for 60 days.  This information should be used as a guide to identify the lenders with the lowest rate offerings.

Check the rates of other lenders and compare them to the rates offered by the lenders above.

The rates and other information provided above is intended for consumers to use as convenient guide to assist them in comparing rates.  Interest rates change daily and sometimes midday due to fluctuations of the Mortgage Backed Securities market.

BankerBroker.com makes reasonable efforts to provide accurate rates and other information, but does not guarantee the accuracy of the information provided.

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Investment Properties - There are add ons to the interest rate for investment properties over 70% of the value of the house.  Try increasing your down payment or reducing your loan amount so that the loan is less than 70% of the value of the investment property to get an even better interest rate. 

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All online rate and payment quotes issued by bankerbroker.com's online mortgage system assume a middle credit score of 740 or higher and a debt to income ratio under 40%.  There may be adjustments to the interest rate and/or points paid if the applicant's credit score is below 740.  Once you return your loan paperwork your assigned Loan Coordinator will review your specific loan options and will let you know up front if there are any adjustments to your specific scenario.  Not all applicants will qualify.