[Complete Guide] How to Rate Shop Lenders?
First things first. You are not going to put your name and contact information on any sites that say they will offer you the lowest rate. That is a last resort. Some of those sites literally are selling your info for $50+ to multiple lenders which can turn your life into an endless loop of receiving robocalls. Yes, when they say they are comparing lenders for you they are literally selling your info like a baked good to the highest bidder. Lenders who pay for leads are successful by implementing the age old sales technique of hounding. Think I am kidding? Fill out your info on one of those sites and wait for the calls to come in. I have had clients who had to change their phone number.
If I was shopping a lender as a lender here is what I would do.
- Start with online browsing: You can easily google a mortgage companies name and the word rates and 9 out of ten times it will take you to a link on their page which shows an estimate of rates for that day. You are not inputting your information yet. You are looking for ballpark. That is what the websites tells you. It tells you what ballpark the lender is in. Make sure you read the terms and disclosures. Sometimes you will be like “wow they are so low” and then when you click on the terms and disclosures you see they are charging you 1 point for the rate. What is a point? 1 point + 1% of the loan amount. So, if you have a $300,000 loan and they are charging you 1 point for the rate that means you are paying $3000 to get that rate which may make that rate the most expensive. My website with rates is pretty darn transparent. To get your feet wet go take a peek. You have to scroll to the bottom of the page but they are there😊 https://people.rate.com/jennifer-beeston-247743
- Once you have identified three lenders in a low ballpark time to do some research. Yes, research. Look at third party reviews. If that passes muster, then give them a call. Once again on the call you are not giving them your information. You are having an introductory call. On this call it is critical to identify which actual person you will be working with. Yes, the actual loan officer. Companies that say they do not have loan officers are not being 100% honest. In order to do a loan in the united states it has to be originated by a loan originator or loan officer. Every loan application has a signature of a loan officer certifying the information is true to the best of their knowledge. You end up paying the same for one of the best loan officers in the country as you do for the worst. Make sure the loan officer in charge of your loan knows what they are doing. There are 99 ways to mess up a loan and it all falls back on the loan officer.
If you are buying a home, ask them about their preapproval process and their loan process. Perhaps they have a handy video like this to refer you to https://youtu.be/eevVm2BHKNA They key is you want to see if you get along with the lender. Do not lead with “I am rate shopping lenders for a house I may buy in 6 months”. Rates change very day and lenders cone in and out of the market. The lender who is the lowest in January may not be in June. You have already identified this lender is in a lower ballpark, so it is really about that magical click right now. Do you click? This call it to identify who you like and who will help you reach your goals and most importantly who you trust.
If you are refinancing, you are also looking for a person who is competent however now is the time to ask for a rate based on your scenario. Can we do an official loan estimate without an application? No. Can we give you a rate over the phone and what the lender gees are based on information you give us? YES. If they will give you a rate over the phone awesome. If they will only give you an estimate of rate once you fill out an application be wary. I am always happy to tell people where I am with rates and fees based on their scenario. If they want a loan estimate, they need to fill out an application. It is not worth the paper it is written on without an application. If you get a bunch of lenders to send you estimates without an application they are all garbage because rates change every day and the time between you collecting all those estimates and filling out an application and the lender locking it is rarely going to be same day. This is your intro call to the lender. Once again it is to reaffirm the ballpark and make sure the loan officer is competent and someone you want to spend the next 30 days with. If they are rude now, they are not going to get nicer on day 25.
3) More Research:
I love research, don’t you? Yes, now you need to look up the individual person you are working with. The loan officers. How are their reviews? No reviews? Check linkedin and facebook and even Instagram. Nothing still? Check them out here https://nmlsconsumeraccess.org/ This will tell you everything you need to know. It is important to note that lenders who work at banks are not required to have a NMLS number but all your loan officers at quicken, loan depot, guaranteed rate etc… have NMLS numbers. If you want to see what these looks like my NMLS is 247743. It shows my employment history, how long I have been in the business and all the states I am licensed in as well as if any regulatory actions have been taken . This can be handy as lenders only should be discussing rates with you for states, they are licensed in.
4) Time to input information:
Now is the time to fill out an online application and have the lenders pull your credit. Of the three I would apply with two. Who were the top two you talked to? Apply with both of them. If you are refinancing now is the time to consider locking and seeing who actually has the lowest rate and fees. If you are buying it is time to go through the preapproval process. Remember I have the handy video https://youtu.be/eevVm2BHKNA For refinances you stop here at step 4. Buyers lets go to #5.
5) Time to choose: You have preapprovals from both lenders. Are the rates similar? Is the service similar? If you like them both but one is much higher you should start focusing more on the lower one. When you are writing offers use preapproval letters from the lender you think will most likely win. Once you are in contract you are going to call both of them and ask for rates and their fee. You are doing this again because as I said in step two the lender who is lowest in January may not be the lowest in June. Always good to double check. Time to Pick the winner.
A special note: If one lender is the clear winner just pledge your loyalty to them and take the guesswork out. There are circumstances when one lender is just truly better in all ways and will take amazing care of you. By working with one lender you are not putting yourself at a disadvantage. It is like dating and marriage. Steps 1-4 you were dating. Now it is time to get married.
Personally, I have paid more on refinances and purchases to work with lenders who I trust will get the job done. Could I have spent 19 hours and gotten a lower rate with a lender I did not know or trust sure. But for .125% or $500 why would I take the risk? Money is important but getting the job done is more important and working with a less trusted lender to save $100 is not worth the mental pain. It does not matter how great “the rate” is if they can’t close it.