How to shop for mortgage interest rates.

Many people reading this article may not have much experience comparing interest rates and lenders and may be avoiding shopping for a mortgage out of anxiety. Here are some dos and don'ts from someone who works in the mortgage industry to help you navigate the experience:

Don't fill out multiple loan applications.

You don't need to complete a full mortgage application to receive an interest rate and fee quote. Some companies will train their employees to get an application to further the sales process before telling you what they can offer. The reality is that they can accurately quote you rates and fees without a credit report or loan application (assuming you provide them with enough information). It is important to note that the rate quote will be based on the information you provide. The home value, credit score or some other piece of information may change things later, but at this stage you are comparing lenders and the reality is that the best lender for you at a credit score of 740 is probably still the best lender for you if your score turns out to be 680.  

Do provide the lender with all the details.

Calling a handful of lenders and asking them what "the rate is" does neither you or the lender any good. Mortgage quotes are based on multiple factors, all of which can change the rate and fees you qualify for. If a lender is asking you something basic about your situation or the property, answer to the best of your ability. It will only make the quote you receive that much more accurate. In other words, if you are hiding the fact that the home has renters to receive a better quote, it will come out during the process and the lender can hardly be blamed for not following through on the pricing offered under false pretenses. 

Do provide the same information to all lenders.

This may sound basic, but make sure that any lenders you receive rate and fee quotes from are basing their loan quotes on the same loan scenario. I have spoken with borrowers many times who have said that another lender was offering a better deal, only to find out they have given them a different home value, credit score or some other vital piece of information has changed. It only makes sense, if you tell one lender the home value is x and you tell another that your home is worth y, they are not using the same information to determine the rate and fees you qualify for.

Do compare lenders on the same day.

Rates can change by the hour, so if you are comparing a quote from one lender on Monday to a quote from another lender on Friday, you are comparing apples to oranges. Try to set aside a block of time one day to do some rate shopping for the most accurate results. Once you have compared lenders at any given time, the difference between them will likely remain similar regardless of whether rates go up or down before you lock. 

Do ignore tax, insurance and title figures.

If you receive a Good Faith Estimate, ignore the insurance, tax and title figures because these are not typically dependent on the financing you choose. The property taxes are what they are, no matter who you choose for your mortgage. Your homeowner's insurance premium is determined by the company and coverage you choose. The title charges on a purchase are determined by the title company on the contract, not by the lender on the loan. It is important to note that on refinances, borrowers often choose the title company recommended by the lender, but they are not required to do so and are free to shop for those services if they wish. The title, insurance, and tax figures on a Good Faith Estimate are simply there for you to get a rough idea of your closing figures, not for comparison shopping. 

Don't assume lowest is always best.

Obviously, if you feel comfortable with two lenders and you believe they can both deliver on the mortgage they have quoted, you should probably choose the lower of the two. However, many factors go into a mortgage and not all mortgage professionals or companies are created equal. Sometimes you may have to ask yourself if it is worth the stress and possibly not closing on time to get the lowest possible estimate. If it takes 35 days to close and the lowest rate lender locked you for 30 days, who pays for the lock extension and at what cost? If it is you, was that really the best deal? If the lowest rate lender has the strictest guidelines, will you get approved or will you have to spend money on appraisals and inspections to find out? 

Wrapping up: 

In order to get the best results when interest rate shopping, obtain quotes in writing for your unique situation from a number of different lenders on the same day. Compare only the lender charges and the rates on the same loan program. Once you have compared and researched, choose a lender you believe will deliver as promised and move forward with the confidence that you have done everything possible to obtain the best loan. 

Thanks for reading my blog!

Website: Mortgage Rates in Arizona

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