How to Shop for a Mortgage the Right Way

Written by Posted On Thursday, 23 May 2024 00:00
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“What are your rates?” is probably the question not only heard first, but the most common. And that makes perfect sense. After all, you know there are a lot of lenders out there, and while they mostly have the same products there can be slight differences in rate. But there are right ways and wrong ways to ‘shop around’ for a mortgage.

One of the things you must do is to make sure you contact your potential lenders on the same day. Rates can change from day to day, although they’re mostly stable, they can change. If you call and get a rate quote from a lender on Monday and then call another lender on Tuesday, you might not be getting a true apples-to-apples comparison. 

It’s certainly possible that Lender A had a good rate on Monday but rates changed overnight and Lender B has a slightly lower rate. It’s a disservice to you and Lender A if you don’t check rates on the same day. Not only that, but get your rate quotes at around the same time of day due to the possibility of an intra-day rate move.

Next, tell each prospective lender your expected loan amount. Rates can be higher or lower depending on the amount borrowed. Sometimes while the rates are the same, there might be a difference in price. What is price? Price is how much you might pay upfront in order to obtain your desired rate. A rate at one lender might go for one discount point while that same rate might be available at another lender for one-half point.

Also, ask for a list of lender fees. There are certainly others involved that you’ll be paying for at settlement, such as attorney or title charges, but your lender has no impact on these third-party accounts. Just the lender fees are all you need to get a quote for. 

Finally, ask about rate locks and how much each lock period costs. Rate locks might be for as little as 10 days and up to 60 days or longer. Choose the shortest rate lock period as possible to secure your rate while still giving you enough time to get through your settlement.

Be sure and have a pen and paper or otherwise record your conversations, because it can get somewhat confusing when you’re dealing with multiple lenders, different rates, lock periods, and lender fees. There you go...you’re all set!

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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