How to Shop For a Mortgage Loan

Shopping for an interest rate is not like shopping for groceries.  To create a picture, it would be like selecting the yogurt now that you will be eating 60 days from now.  Rates and pricing strategies change on a daily basis, sometimes twice a day.  No one has any way of knowing how rates are going to change over the next month, or the next year, or the next five years.  Any statements about the future are just speculation or opinion.

The responses I receive from my clients are identical, usually started with a skeptical chuckle, “Then, how do I know that I am getting the best deal?”  Trying to shop for the lowest mortgage interest rate is much like spinning plates.  Once you commit to lender #1, company #2’s rate drops; then you try to switch and a third and fourth come into play.  There you are in the middle trying to juggle all these rates, with no actual idea which one is going to drop next.  Let me tell you a secret, your loan officer doesn’t know either; he or she is just a better juggler than you.

You may be thinking, “Well, I’m not just going to trust some one else with my financial security.”  But, when it comes right down to it, trusting someone is exactly what you will need to do.  This brings me to the focus of this article: You must find a loan originator you can trust!  In other words, don’t shop for a lender or an interest rate; shop for a trustworthy loan originator.

How do I know that I can trust my loan officer?  The answer, yet again, is that you can never know for sure, just as you can never know how the market is going to affect interest rates.  However, the average person has much more experience as a judge of character than as an economist.  So use your instincts, as well as reliable referrals, and find business partners you can trust.

Because of my strong moral convictions and knowing that it would be easy to get lost in the sea of mortgage professionals, I have chosen to distinguish myself by being ethically responsible.  Instead of trying to make a quick buck, I put the interest of my clients first.  Some may look at this statement skeptically, but I have found that it is much more profitable in the long run to conduct business ethically.  That is why my business card says “Mortgage Consultant.”  A mortgage consultant strives to understand you as a borrower, the property, and the best solution for your transaction.

In developing this philosophy, I have come up with some easy tells to help judge the ethical temperature of your LO.  Here are some tips in evaluating your loan officer:

1. Is your LO voluntarily explaining the details of your loan? Your LO is required by law to disclose many things to you in written form, but is he or she explaining your loan without you having to ask the questions?  Your LO is very aware of the specifics of the offer being presented.  If you have to ask, he or she may be trying to hide something.
2. Is your LO empowered? Meaning, does your representative have the ability to customize your mortgage loan to you and the property?  Every borrower and property has their unique characteristics, and the loan programs that are being peddled are mainly one-size-fits-all.  Do you want a loan program designed to profit the lender, or a loan that helps you meet your goals?  This is a common problem with large corporate mortgage lenders. The customer must accommodate them.
3. How well did your LO pre-qualify you? Most people are wary to give their information upfront.  The average LO will simply get the client started without trying to understand the transaction; assuming that since they are already invested, they won’t change lenders.  But a good loan originator will ask a lot of questions before investing a lot of your time and money into the application process.  This will accomplish two things:
   • The LO will be better able to understand your specific transaction, and therefore, give appropriate advice.  There may be no programs available at that specific lender that will benefit you.  If that is the case, your representative should advise you on a better place to go.  Mortgage brokers rarely have this problem.  A good broker will have 10-15 lenders in their portfolio, all with different niches. (Going back to point #2, this is another form of empowerment, being able to offer the services of more than one lender)
   • You will save time and money.  Anyone who has purchased a home knows that time is often the most important factor in the process.  There are many issues that will not break a deal if they are addressed early.  If your LO is able to look ahead in the process, and search for potential issues before an underwriter or closer finds them, that could make the difference in closing your deal on time and avoiding expensive costs associated with loan process delays.

Shopping for the lowest rate is a poor way to find a loan officer you can trust.  Since even the smallest of shops have the same rates as corporate lenders, going with the lowest rate means you are going with the person most willing to lie.  Unless you are an economist, you have no idea how the market is going to change.  You must use your judgment of character to find a loan originator you can trust.  Using the tips I have given above should help you evaluate your loan officer.  You do not want to be led blindly through the loan process.  Educate yourself and get your information in writing.  Trust, but verify!