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Using Surveys Effectively
Comparing interest rates from lender to lender is just the first step to gettting a great deal. There are many other important pieces to "a great deal" to consider while shopping for a mortgage loan. When using our survey, or any other surveys found in the newspaper or internet, you need to review fees too. Please review this mortgage survey screenshot taken from another good mortgage rate survey site and lets review it so you can understand really what your seeing here.
The loan request was for a loan for 180,000, with a borrower FICO score of 740, and 10% down and these are the results in order left to right presented as the top three.The rate is the same on all three, the lock period is 30 days for all three but the APR is different for all three due to the difference in lender fees so lets review those fees.
Under Lender Origination Charges, two of the three are the same, an the third is about $500 more. The second line below Lender Origination Charges, Your Credit for this Interest Rate, is more important because it indicates that the lender is going to pay that amount of your origination fee. In this example lender number three (far right) is not only higher in origination fees but also giving the least credit back.
Required Services the Lender Selects are the appraisal, attorneys, etc. In this case, lender two is best.
The next two lines, Title Services and Owners Title Policy are set in many states by the Insurance Commission and are standardized so they can be ignored
The line Required Services You Can Shop For is an odd line. Only lender two put in a number there, when all three have that so that should be added to the other two or taken out of lender two's fees to even that out.
So, in summary of the fees, once you make those adjustments, the actual least expensive lender is lender two, not lender one like was presented if you ask to see who has the lowest fees in the survey filter.
Under the Payment section you see that the Principal and Interest is the same, but notice the Private Mortgage Insurance is not the same, but should be, since most lenders have access to the same PMI companies and have the same insurance premiums. So, in this example, if you searched for the lowest payment, lender two may look better but in reality, they most likely are the same.
The point of this section was to show you that you need to be careful and review what is presented and compare all facets of the data from any source. If the survey source does not contain much data to compare, the more to be wary of that accuracy of the data since it can be manipulated.
Other Major Things to Consider When Picking Your Lender
The mortgage rate offered in your situation is important, but in reality, experience and company capabilities and reputation are equally important. You may get a real low ball rate from an in-house bank loan officer, but typically those have the least amount of experience and as of 2014, are not even required to be licensed or tested because they work for a bank.
There are many, many moving pieces in a typical mortgage transaction that need to be managed from typical qualification issues to title and survey issues, to property inspection and problems. Having an experieced loan officer with local connections with all involved is well worth paying more money for when problems arise.
Although larger lenders look impressive with all of their advertising, in many cases they are much slower to process the loan. One large bank in particular has a horrible reputation because they take 60-90 days to process a file that should take no longer than 30 days. Ask you loan officer how long they taking to close a loan. Will that meet your contract deadline?
Having a lender with many products to offer is important too. Most lenders can do Conventional, FHA/VA and Jumbo loans, but can they do USDA and do they have access to all the different Bond Money programs your state has to offer? More importantly do they know how those programs work and know how to process them?
Your local Realtor and title company escrow officers are aware of the reputations of the local mortgage companies and individual loan officers. Once you have a few good names, take the time to compare their reputations, rates, and fees and then you will have truly gotten a great deal custom made just for you.
Rate: We have seen over the years people advertising Adjustable Rate Mortgages with 5, 7 and 10 adustments as fixed rates. Although this is agains the law, they do it anyway. Make sure that when your comparing a "fixed rate" mortgage that it is fixed for the whole term of the loan. ARM's will be priced better than normal fixed rate loans so it will appear that these lenders have a better deal.
Fees: Probably the biggest discrepancy we have seen is fees. When you are comparing fees, you need to be comparing the same set of LENDER fees. In many states the non-lender fees like appraisal fees, title charges, recording fees, etc. are pretty standard or set by the state. In our opinion, the only fees to compare are the lender fees such as underwriting, processing, doc preperation, admin fees, credit report, and attorney fees. Why? The other fees are going to be pretty much the same everywhere you go but these will always be different.
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