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Rate Shopping

Hello. I wanted to do a video about rate shopping. For mortgage rates, interest rates. A lot of people kind of shy away from talking about price. And I don’t love talking about price. Because there’s a lot of other things to consider when you are shopping for something, especially a service. With a product, either the thing is built right or it isn’t. Maybe you need to return it, there’s less risk there.

Shopping price for a service versus a product

With a service, you’ve got a human being who’s gonna help you do something. A doctor, lawyer, dentist, plumber, realtor, mortgage lender. It’s a really careful analysis that a lot of people don’t really do. And you end up shopping by price alone. You end up getting poor service. And those people are usually the first people to scream bloody murder that how dare you not get me to the settlement table on time. You didn’t tell me this, you didn’t disclose that. I wasn’t aware of this. So you really need to take a careful analysis of not only price but also execution. If you’re really price-focused, talk about it on the front end.

Take into account service, education, experience and responsiveness when rate shopping.

I’ve had so many people, countless, where they’ve used my services on the front end of a transaction. They get educated, they get pre-approved, or they’re using my pre-approval letter. I’m answering questions on weekends and evenings. The listing agent loves me. And your mortgage lender has to sound mortgage articulate and excellent and experienced. And instill confidence in your financing and your deal. I help get the offer accepted. And then at that point, after what could be months or much longer of free work and education, then somebody decides it’s time to rate shop.

Price discovery should happen very early in the process

Price discovery, that’s a good way to call it. It really should happen earlier in the process. Don’t use people for services and education and free stuff to then shop price. I think that should happen earlier. Another thing that’s confusing about price. People will look at a loan estimate from me, a loan estimate from another lender, and they see their cash to close is lower. But the rates are the same. I’m going to go with them. When in fact, what was likely to have happened is that the other lender may have low balled some of the fees that are out of our control. Lenders, we don’t control title costs. We don’t know upfront what’s the exact amount of the property tax escrow going to be. There are a lot of things that we’re just strictly ball parking.

Look over the fees closely when rate shopping

Now, of course, we should know and we’re required to know to the penny our own fees. The lender fees. So if someone says your cash to close is $50,000, and I say your cash to close is $52,000, it doesn’t mean that they have the better deal. It may just mean that they’ve arbitrarily disclosed lower some fees that are going to be what I said they’re going to be anyway. And at the end of the day, your cash to close, it’s $52,000. Then you’ve made a choice of a lender on the wrong basis.

Or if it could happen vice versa. I say $48,000 for cash to close, somebody else says $50,000. Doesn’t mean my deal is better. Strictly look at the interest rate. Strictly look at the lender fees. Everything else is subject to change and is out of the lender’s control. So just look at what’s the rate. Are there any discount points? What’s the appraisal fee, credit report fee? There’s a couple of tax service fee, processing fee, some people call it a loan origination fee. Just look at the very first block in a loan estimate. Look at the lender fees and the rate. That’s all you need to see. Everything else is subject to change and can be manipulated to make somebody’s deal look better.

Rates can change every day?

Also timing, the timing of when you get a rate quote. Somebody may call me on a Monday, I give them a rate quote. They take a couple more days, on a Wednesday they speak to somebody else because they’re busy at work. Wednesday, that other lender gives them a higher rate quote. And they think, “Well, Brian wins. He’s got the better rate quote.” But maybe my rates have changed too. Because maybe the market has just shifted from Monday to Wednesday. Rates can change daily. Sometimes rates can change two or three times a day, not frequently, but sometimes they can. So it’s really best to get a rate quote same day, same time of day.

Isn’t service just as important as price when rate shopping?

And then really at the end of the day, the most important thing is look at everything. Like responsiveness, education, professionalism, look at a service providers reviews. Does a lender have any reviews? How do you know this person is really going to perform? And does getting a little better deal matter? You know how it goes. We all hire lots of service providers and everything seems great on the front end. And you give them a deposit or whatever, and then in the middle of the deal or the back end of the deal, things go awry. You really, really, really have to put a lot of emphasis on the service provider and do they appear to be excellent, professional, and responsive. Have they educated you? Given you any value add,? Done anything to earn their keep or have they just quoted a rate? 

Conclusion – Rate Shopping

I just don’t know how you can be sure by strictly shopping price. How you can be sure that you’re going to get what it is that you need to get. Which is get to the closing table. Lots of things to talk about when it comes to price. I don’t shy away from price. We use a lot of different investors and institutions to go out and find a competitive price. We’re certainly in the game of providing a competitive deal. But I also want to put emphasis on all the other things you need to consider when you’re choosing a service provider, certainly a mortgage lender. I hope that helps. Let me know if you have any questions related to that or any other topic. Thanks very much.

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