The 5-Point Plan When Shopping for a Mortgage
If you're shopping for a mortgage, you may have noticed that you started getting a lot of calls and mail from mortgage companies.
You may be wondering how they knew you were in the market for a mortgage – especially if you've talked to only one lender. Here's a little secret that many consumers don't know:
When a mortgage company pulls your credit, this sets off what's called a trigger at the credit bureau. Based on this trigger, THE CREDIT BUREAU (not the mortgage company) sells your information to trigger companies who then "unleash the hounds" in an attempt to steal your business away from the mortgage company you first spoke with.
We've written other blog posts about this practice, so I will not go into detail here. But, be sure to read, Triggers: A Legal Business, and Abusing Trigger Leads, for factual information about this practice.
Why this practice adversely affects you
Once your credit is pulled and the trigger process gets started, trigger companies will strike while the iron is hot and immediately begin marketing to you – hard – because they know you're looking for a mortgage. It will seem as if everyone has a "lower rate" than the next.
Don't get me wrong. Competition is good, and it's necessary for you as a consumer to shop around and get the best rate and loan package.
However, when you entertain multiple offers from various lenders it's pretty easy to get a little off track with things. Many customers wind up with numbers for all kinds of loan scenarios.
In the end, you may spend time and money processing a loan application that may not save you the most money or even meet your original goals.
Since we help dozens of people every day who are in the process of shopping for a mortgage –and seeing the numbers they're being quoted by other companies – we know how certain parameters are manipulated by competing companies to make their numbers appear better.
We came up with a 5-Point Plan When Shopping for a Mortgage to help ensure our customers are indeed getting the best deal out there - if that's all they care about.
Of course there are other factors of equal or greater importance such as integrity, customer service and follow through which need consideration.
But if you want to just get jacked up about the numbers here's how to go about it so you don’t get jacked in the end.
Rule #1: Know the exact amounts of your property taxes and insurance
If you plan to escrow your property taxes and insurance into your monthly payment, know before you shop how much those amounts are. If you allow companies to estimate these amounts for you, the payments and closing costs will be manipulated.
Rule #2: Allow each lender to pull your credit
Your mortgage rate is driven primarily by your credit score. All lenders rely on credit reports they pull themselves to price your loan. If you are trying to protect your credit by telling lenders you have your own credit report or know your credit score, the quotes you get with that are worthless.
Rule #3: Use the same home value with each lender
This is a biggie. Everything is based on the value of the home. To ensure lenders are providing you with sound numbers, you MUST use the same home value estimate with each one of them in order to compare.
Rule #4: Use the same loan amount with each lender
Same as home value, if you tell one lender you want to borrow $225,000 and another lender that you want $235,000, the $10,000 swing makes a huge difference in the rate you’ll be quoted.
Rule #5: Get all your quotes in writing
Any quote you receive over the phone is meaningless. The only quote that matters is the one you receive in writing – on the Good Faith Estimate (GFE).
The GFE is important for three reasons:
- It's required by law.
- It gives you an estimate of your loan terms.
- It lists your estimated settlement charges at closing.
Using GFEs from multiple lenders, you can then compare loans based on meaningful numbers including: home value, amount of loan, term, rate, and closing costs. If a lender delays giving you a GFE, go elsewhere.
No matter which lender you end up using, keep these guidelines in mind when shopping for a mortgage. And remember; always choose a company you feel comfortable doing business with.
Have questions about rates or loan products quoted by other lenders? Call our office at 877-878-0100.
We help people every day save money, pay off that junk debt, and find peace of mind. (Take a look at our Customer Reviews page for proof.)