Shopping for a Mortgage

Why Shopping for a Mortgage is Different Than Shopping for Other Consumer Goods

There are hundreds of loan products from which to choose, all with different costs and benefits, qualification requirements, and all with unverifiable pricing.

• If you were shopping for a hammer there are only a few options to consider; Will you be driving nails or shaping metal? Do you need a hatchet to cut shingles or a claw to remove nails? You can take a trip to the hardware store, view the selection of hammers, buy one, and immediately take it home with you. When shopping for a home loan, how do you know which loan program has the best features (or for that matter, what features are even available), and how do you know which loan is most appropriate to meet your long– and short-term financial goals? You certainly can’t use the same buying strategy that you would in buying a hammer.
• There is no need to prove that you are qualified to buy a hammer. You find one you like, you buy it. Home loans, on the other hand, usually can’t be obtained before you prove that you are qualified.
• Without knowing whether you qualify for a specific loan program that interests you, you don’t know whether that specific program is even available to you. When a lender lacks knowledge or is unscrupulous, they might promote the loan program that interests you to gain your business (whether you are qualified or not) and then, after you have committed to them, they attempt to secure the loan program that you desire. The problem is that you may not qualify for the program that you want and by that time you have committed time, and maybe even money, to an inexperienced, or even worse, a dishonest lender.
• The price of a hammer is clearly marked. The price of a home loan is much more difficult to “nail down”. Interest rates are constantly changing, sometimes several times a day. Loan programs have additional costs or credits based upon how well you are qualified, the loan-to-value ratio, lock periods, refinance or purchase mortgage, etc.

Faced with hundreds of loan choices, qualification requirements, and no way to really verify price; How do you determine which home loan best meets your needs and financial goals and avoid being taken for a financial ride?

• Look for an experienced lender, preferably referred by someone that you trust and that had a first-hand experience with the lender (be aware that some Builders, Realtors, and Financial Professionals may refer lenders with which they have a “relationship” and they may receive a financial benefit for your referral).
• Only work with a lender that is aware of what specific factors affect mortgage interest rates and one that actively monitors those factors. (Please see article titled “You May Be Well Qualified, But Is Your Lender?”).
• Look for a lender with which you would want to build a long-term relationship.
• Look for a lender that is passionate about helping you manage your mortgage into the future with systems that will notify you when it makes financial sense to reassess your mortgage.