Everyone wants the best price and best value, whether it is when buying a gallon of milk or a mortgage. Most lenders’ business comes to them from referrals, which is a very good thing, and many mortgage loan originators have had years of experience watching borrowers shop for loans. Some shop different lenders as if they could make a selection based on price. Most mortgage borrowers, however, don’t try to shop; they select or are selected by a single lender, which tends to work just fine.
But unlike a gallon of milk, there are at least two prices that must be considered when shopping for a mortgage: the interest rate and total lender fees. On adjustable-rate mortgages (ARMs) there are also rate caps, the rate index used, and the margin over the index. Borrowers should know that an interest rate all by itself means very little. Multiple prices complicate shopping by borrowers when a number of factors enter into the decision: the products can change based on the borrower’s qualifications, the loan-to-value may change based on the appraised value, and the actual rate and price can change from day-to-day, or even during the day, based on bond market fluctuations.
Up until the recent pandemic, borrowers were at a slight disadvantage in the process of shopping for lenders because of a lack of knowledge or experience on behalf of homeowners. Since borrowers don't typically shop around, lenders can take advantage by knowing it, whereas honest lenders believe in total transparency, and will not quote a price to a borrower below the price they are actually willing to accept.
Low-balling just to get buyers on the hook is endemic on internet-based referral sites that display price quotes by dozens or hundreds of lenders, for example. Potential borrowers should be very careful when shopping for a mortgage – it is an important process that can result in a difference of thousands or even tens of thousands of dollars in the price you pay for your mortgage.
This is why we built MortgageBite, in fact, because of the amount of dysfunction that exists in the mortgage lending market. When lenders make their customer's promises about "when banks compete you win" is hogwash, there is no real competition. The race is who can make the call within thirty seconds of paying for your personal information, so they can incessantly call during the worst times. MortgageBite puts lenders in control and keeps your personal data and information under lock and key until you and only you decide the mortgage offer that best fits your needs. This allows you to connect directly with your lender to get more details on your offer. Want a second opinion, simply do it again until you find the perfect lender and best price for your mortgage.
Are you buying a home? Before you make an offer, find a mortgage lender with MortgageBite’s Free lender comparison tool.