Guest Author: Mondie Pic'l
Some people love to shop. However when it comes to shopping for a loan, shopping isnt exactly fun! It can be complex and overwhelming. However there are some key things you can do to make sure you get the best terms.
When shopping rates it is always imperative that you shop rates on the same day. Mortgage rates change daily so if you talk to lender A today and lender B tomorrow you are not comparing the same data. Call Lender A back to get an update on their rates. The time to shop is when you are ready and able to lock a rate. I always advise my clients to pick one lender to prequalify with and then shop the rate once an offer has been accepted. There is no need to prequalify with multiple lenders and any rates you are given prior to an accepted offer will be different by the time you are actually ready to move forward. The same holds true when refinancing.
Know your credit score. In todays credit environment a credit score can make a difference in your rate and terms. In some cases it will alter the rate by .125%. If you have been prequalified and are shopping for a rate be sure to get your middle credit score from the lender who prequalified you so that you are shopping with comparable parameters.
It is also important to get a breakdown of fees from each lender. You need to know what you are paying for in advance from each lender you are working with. One lender may quote you an origination fee but fail to disclose a discount point (an upfront cost to secure a lower rate over the term of the mortgage). On a purchase you need only compare the lenders fees. Title and escrow will be estimates as the lender has no control over who is selected to perform those services.
On a refinance the total of the fees including title and escrow are important. A line item total will tell you who has the best cost vs. rate.
READ MORE: What kind of closing costs can you expect?
When you are ready to commit to a lender you will need to cover a few basic questions with them:
When can I lock my rate?
Due to the number of low appraisals and more stringent credit criteria many lenders will not offer a rate guarantee until your appraisal is completed OR your loan is fully approved. This makes shopping for a rate very difficult. The rate may be very attractive when you apply only to find that it has changed when you are able to lock a loan. A rate lock at application is always the best
How long is my rate lock good for?
On a purchase you want to make sure your rate guarantee covers the length of your escrow. A 30 day rate lock does you no good on a 45 day escrow. On a refinance many of the larger banks are offering a 90 Day rate guarantee which sounds great until you find out it will take 90+ days to get your loan closed and you are in fact paying a higher rate and or points to go with the 90 Day guarantee rather than selecting a lender that can offer a 30 day guarantee and close your loan within 30 days. Remember the longer the rate guarantee the more expensive the cost to you.
Can I float my rate down?
There is sometimes an option to float your rate down if rates decrease during the processing of your loan. It is an important question to ask as most lenders will not volunteer their policy. Some lenders offer to float down your rate as much as .375% at no cost. Other lenders offer to renegotiate your loan and get the rate within .125% of the current market. More often you are not offered any type of float down option in writing which makes it difficult to negotiate in the event rates drop. Whatever the float down you are offered it should be in writing. It may be the deciding factor why you select one lender over another.
What happens if my rate lock expires?
Most lenders will cover the rate extension if it is due to a delay on their part. However, if your escrow is delayed it can cost you up to .25% of your loan amount for each 10 day extension.
Make sure you have a good faith estimate or closing cost breakdown before you lock your rate and cut the competition loose.
Many borrowers assume they were quoted a 30 year fixed only to find it was a 5/1 ARM and by the time you get back to another lender to secure the rate they quoted you that rate could be gone. Review your good faith estimate with your lender and ask lots of questions.
Asking questions of your loan consultant is the key to getting the best loan at the best terms. It doesnt make the shopping for a loan any more fun but it will certainly give you more confidence when making the decision of which lender to select.
Mondie Pic'l is the Branch Manager with Fairway Mortage. She has over 25 years
mortgage banking experience and has demonstrated a lasting commitment to
providing personalized customer service.
Please feel free to visit Mondie's web site at www.mondiepicl.com. Her
direct line is 626-233-1303