When it comes to getting a home loan, many people struggle with where to find the best loan for them. Shopping for a mortgage is different than shopping for a toaster. With a toaster, you can go on Amazon or walk into a store, pick the toaster, pay for it immediately, and if it doesn’t work the way you like, you can return it. If the price changes at the register, you can opt to put it back on the shelf. If it breaks the first time you use it, it should be an easy return. A mortgage is a bit more complicated. There is no return policy, and if rates and fees end up higher than advertised, sure, you have the option of “putting it back on the shelf”, but it may mean missing out on a home you love and a ton of wasted money.
Most people know that shopping for a mortgage is the way to go when looking for the best loan, but few people know how to shop for a mortgage loan.
The best place to start when shopping for a mortgage is where other people have had success. Talk with friends and family and find out who they used, and if they were satisfied. Talk with your Realtor and see why they recommend the lender they do. Referrals are a great way to put together a short list of potential lenders that you’ll want to work with.
Keep in mind, online reviews are NOT referrals. Many companies and individual loan officers game the system online, obtaining fake reviews and testimonials to paint themselves in a good light. While some reviews are accurate, it’s tough to tell what’s real and what’s not online, so personal referrals are a much better option than seeking out highly rated online lenders
You should only have to complete a full loan application with one lender in order to get started on shopping. With one pre-approval, you’ll have the information every lender will need to quote you rates and fees – your credit scores, your debt-to-income ratio, and all of the other info required to get you an accurate quote. Keep in mind though, you’ll want a full pre-approval. If a lender doesn’t request your financials or tells you they don’t need to pull credit for a pre-approval, there’s no way they can give you an accurate quote – this is a red flag to find a new lender and FAST!
Do your shopping on the same day
Once you have a short list of referred lenders, do all of your shopping in as short a time window as possible. The reason is that mortgage rates change daily, and sometimes several times in a single day, so calling lenders on different dates is going to result in a really poor comparison and cause a lot of confusion. If you compare lenders on the same day, you’ll get an idea of who has the best rates and prices, and you’ll truly be comparing apples to apples. Getting quotes spread out over a period of days or weeks could end up costing you a lot of money by not having accurate information.
Focus on rate and fees
Some lenders have great rates but astronomical fees. Others have no fees but the rates are ugly. Lenders fees and rates are effected by a lot of things – their loan officer’s compensation, operations staff, marketing, and more, so it’s important to remember the cheapest lender may not provide the best mortgage experience or the best loan. And the lender with the lowest rate may have a poorly paid and inexperienced staff that can either make the loan process a nightmare, or worse, cause you to lose out on a home!
Your best bet when it comes to cost is to find a lender with competitive rates and competitive fees. Usually the ones that are lowest aren’t the best companies, and the ones on the higher end are unnecessarily expensive.
Avoid Big Banks
Think of the companies you constantly see in TV advertisements, on arena floors or stadium walls. Now think about how they get the money for those big advertising budgets. Did it sink in yet? Using big banks with huge advertising budgets usually means you’ll be paying a premium in rate or fees so they can cover that expensive marketing.
Bigger banks are also notorious for a sloppy loan process, due in large part to their size (files are often transferred from one department to another, without each department knowing the loan file inside and out).
For the best service experience and lower costs, you’ll generally have better luck with a mid-sized or smaller lender that doesn’t need to charge people to cover for a multi-million dollar marketing budget.
As a lender, you’d think we wouldn’t want you to be shopping around, but in reality, when a borrower shops it’s better for them and us. When you’ve already been quoted ridiculous rates and fees, you’ll more easily see the value in our well priced products. And when you’ve spoken with a loan officer from another company that seems to not be able to get you off the phone fast enough, you’ll appreciate our team’s dedication to asking the right questions to ensure you’re getting the right product. We know that not every lender can match our level of service, and we know that we’re very competitively priced, but you won’t know it unless you shop. So we hope with these tips, you’ll be able to feel comfortable when seeking out a mortgage loan. And if after you’re done shopping for a mortgage, you decide Mason Mac is the lender for you, we’ll be here waiting to help!