So, the first thing you want to do is put all of the lenders that are contacting you on point. Tell the second, third and forth lender that you will be calling them back a specific day during the week. Then follow through by working with one lender each day until you have enough quotes to make an informed decision.
Note: You may have a lender try to push the issue by saying "rates are going up, you better lock your rate today", in an attempt to get you to speak with him.
The lender may be right in some circumstances, but in all likelihood they are trying to pressure you to lock in with them so the other lenders do not have a chance to close you. I suggest you not work with these types of lenders.
When speaking with the lender, it's the loan officer’s job is to drag the first phone call out as long as they can. The reasoning behind this is that if it takes you an hour on the phone to get one quote, you are less likely to spend three hours after that speaking with the other lenders.
Ultimately, 65% of all "lenders compete" applicants opt to use the first lender that calls them, and the lenders know this. This is why we suggest that you space your applications out over several days.
While giving your application information to the lender, it is important to be thorough. Most of the “surprise closings” that you hear about are the result of inexperienced loan officers who do not ask enough questions.
For this reason, you should be meticulous about the information that you give.This is because if the figures that he quotes you come up wrong, you want to be on record as having told the loan officer the information that he omitted that caused the discrepancy.
A good rule of thumb is, if you have a three minute phone interview with a loan officer you can expect a low quote and a lot of surprises.
There are over 255 conforming mortgage products alone, each having over 30 pages in guidelines. When a loan officer makes a mistake it costs you time and money. For this reason alone, make sure you are communicating everything that is needed for him to give you an accurate quote. You should be ready to fax or communicate the following information during or after the first phone call:
- Income information, check stubs, w2's or tax returns
- Asset information, 401k, stocks, bonds or savings information
- Escrow information, taxes and insurance costs on the home
2. Communicate What You Want
You should communicate exactly what you want the same exact way with each lender. You may be tempted to spend less and less time with each lender as the days go by because each lender typically asks the same questions as the one before them asked. Bite the bullet and do a full application with each lender, you never know which lender will be able to offer the best deal.
When communicating, Let the lender know which type of mortgage programs you are interested in hearing about, e.g. 30 year fixed mortgages. Next, communicate to the Loan Officer that you would like to receive 2 separate quotes for this loan program, each on a separate GOOD FAITH ESTIMATE.
For the first quote, ask for it to be given "without any discount or origination points" in the closing costs. There will still be closing costs on this estimate but they should only be the third party costs i.e. attorneys, title insurance etc. (Another way to communicate this is to ask the lender to give you the quote without lender closing costs. )
For the second quote, ask the Loan Officer to give you a quote with the "par rate" (lowest rate) and to to include whatever origination or discount points they need to give you the lowest rate.
The "par rate" is what the lender "pays" the investor for the money. A par rate costs the lender nothing, but also does not earn them a profit. If the lender gives you a true "par rate" you will have an origination fee or discount points. Make sure you tell them that you do NOT want them to buy the rate down, ask only for the par rate.
By asking for these two different quotes, you are effectively asking the lender to show you her lowest rate (with points) and her lowest fees (without points). This gives you the ability to see how much profit the lender is trying to earn.
All you have to do is subtract TOTAL closing costs on the lower closing costs estimate from the TOTAL closing costs from the higher closing costs estimate, and this will give you the dollar amount of their profit. Make sense? This gives you the answer to the two biggest secrets that lenders usually try to dance around. Now you can compare each lender's quotes with confidence.
This is important to understand:
Lenders make a profit one of two ways. They will raise the interest rate higher than you qualify for OR they will raise the closing costs higher than it cost to close the loan. There are no exceptions.
It's also important to note, that when large banks quote you a par rate, it will almost always be higher than smaller lenders who buy and sell their money to investors. This is because the bank employee is working off of a bank pricing sheet that already has the profit built into the par rate.
3. Research the Lender Online
After you decide which deal is the best, your last goal is to find out as much about the company as you can. Think about this, what good is going with the lowest quote if the lender that is quoting you the figures is less than reputable?
First you need to make sure that you ask the loan officer which state his company's home office is in. Next you need to head over to the Better Business Bureau, for that state this will tell you if the company has any unresolved complaints.
After that, you need to head over to your states Banking and Finance Regulatory Department. Every state has one, and they all call it something different, however, you can find a list of all state banking and finance institutions Here. Make sure you check for complaints in your state and in their home office state.
Keep in mind, most companies will have some complaints, it's inevitable in the modern age where all you have to do is click a mouse to make a complaint. When considering any complaints the company may have, do realize that larger companies that do more loans will have more complaints than smaller shops. Meaning, a company with one complaint and only 100 loans completed is worse than a company with ten complaints and over 5000 loans completed. Make sense?