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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Are you not getting a low enough rate or payment? Here are some helpful hints that even most Loan Officers don’t know to ensure you get the best interest rate and payment possible.
Interest Rate Buydown Options – The initial interest rate quoted is with a 0 point cost. If you plan to keep the loan for more than 36 months, it may make sense to buy down your interest rate to a lower rate. Select “View Interest Rate Buydown Options” located underneath the “New Loan Proposal” to compare your rate and payment options.
Cashout- There is a small add on to the interest rate for loans where you are getting cash in hand or paying off bills through the loan. Try comparing a straight refinance just lowering your rate and payment versus getting cash out.
Loan To Value - There is a small interest rate add on for loan amounts over 70% of the value of the home. If possible, try reducing your loan amount to 70% or less of the home’s value to get an even lower interest rate.
Small Loan Amounts - There are interest rate adjustments for loan amounts under $150,000. If possible, try increasing the size of your loan to get a better rate.
Jumbo Versus Conforming – The best rates are given to conforming loan amounts up to $417,000. Any loan over this amount is considered a jumbo loan. Try reducing your loan amount to $417,000 or less to get the best rate.
Jumbo Loans – Loan amounts over $417,000 are generally better priced with 1 point cost instead of 0 points. Try viewing the interest rate buydown options and compare an interest rate at 0 points versus the interest rate at 1 point cost. With most jumbos it is worth paying a little bit more up front to get a dramatically lower interest rate and payment.
Impounds – There is a small adjustment to pay tax and insurance on your own. Try including tax and insurance in the monthly payments to get a lower rate.
Mortgage Insurance - Is your loan amount over 80% of the value of your home? If so, try reducing the loan amount to 80% or less of the home’s value. This will eliminate any private mortgage insurance required by the lender.
ARM – Thinking about selling or refinancing in a few years? Try a 3 year fixed or 5 year fixed option. Often these types of loans will have lower interest rates and payments than a traditional 30 year fixed.
Interest Only – If you are not concerned about paying off your house and just want the lowest possible payment, try an interest only option. Every loan we offer has an interest only option, including the 30 year fixed. You can always send more than the interest only payment if you would like to pay towards your principal balance, you just won’t be forced to. It’s the ultimate in payment flexibility!
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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Loan Qualifying Assumptions:
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.