How to Successfully Shop for a Mortgage
- December 13, 2019
If you’ve ever tried shopping for a mortgage, you know it’s not that easy. You have to go to multiple lenders, fill out multiple applications, have your credit report pulled multiple times, receive multiple Loan Estimates, and then – finally, after all that – compare everything to find the best deal. If the lender doesn’t have a fully digital application then you’re having multiple conversations over the phone as well. Even with a digital application, your lender will want to speak on the phone immediately to get your rate locked in, taking up yet more time. Is there an easy solution to all of this mayhem? There is! Let’s dig into these issues first so we really get a good understanding of the problem we’re trying to solve.
A mortgage is a big deal, and it takes a lot of work! You don’t want to waste your time with a lender who doesn’t have the best rates for you, but how do you know which are the best? This can be tricky to determine as there is no one source of truth out there. You can go to various lender’s websites and price out your particular scenario, but some don’t have rates available. Some only have rates for a generic scenario and won’t allow you to customize factors like loan amount, property type, and credit score to reflect the true costs of your potential loan.
You can try aggregators but they don’t have all the best rates – just whoever happens to be advertising with them in your area. And, what’s worse is that many of these aggregators sell your contact information as a lead to multiple lenders or brokers. Each one of these will call you, text you and email you several times over the upcoming weeks, resulting in dozens of communications when all you wanted to do was compare loans.
A good solution here is to work with a mortgage broker: their business model is built around aggregating rates and products to help you shop around. While this sounds simple enough, it’s not without flaws. First, a mortgage broker may not be aggregating loan options from many lenders, so they will shop your loan around with 2-3 lenders, grab the best rate, and present you with a quote. If that’s the case then you’re better off doing the legwork yourself. Second, even if your broker shops around with hundreds of lenders they’re only going to show you one quote, which takes away your ability to compare the market. They have special access to a pricing engine and they aren’t sharing that with you.
Third, they may have different compensation agreements with each of their lenders so there is the potential to be presented a loan that isn’t necessarily best for you. Finally, brokers are presenting you with wholesale rates, which tend to be slightly above market. They have to add in their broker fee (whether it’s paid by the lender or you) and that fee is accounted for by the lender in your interest rate. All that being said, your local mortgage broker is still a great resource because they’re committed to your customer satisfaction as a small business operator.
Achroma’s Guide to Shopping for a Mortgage
So how does Achroma fix this? First, we have built a digital mortgage marketplace that can aggregate hundreds of lenders. This way when you apply with us it’s only one application, one credit pull, and your loan is sent out to all our available lenders for a quote. Second, our lenders and their products are listed right on our site for anyone to see – no login required. Finally, Achroma’s business model includes non-commissioned Loan Coaches so we’re able to accept below-market compensation from our wholesale partners. We then pass those savings on to you in the form of lower rates and fees. See our current rates to calculate your particular scenario.
Comparing Loan Estimates
So, what you do once you have multiple Loan Estimates. How do you know which is the best deal? Since the Loan Estimate is a standard form, you can look for different pieces of information and compare them directly to each other.
Let’s work with a real-life example and I’ll show you what I mean. Before I started as a Loan Coach at Achroma, I refinanced my house. Being a mortgage insider, I found some of the best rates and applied to those lenders. I then used the best deal from one lender to leverage an even better deal from another one, which saved me several thousand dollars. Sounds easy, right? Not so much.
Here are the basics from the lender’s initial Loan Estimate who eventually closed my loan, which was a 20 year fixed rate loan. We’ll refer to them as Lender 1:
Lender 1’s Initial Loan Estimate
|Appraisal, Credit, Recording Fees||$755|
|Funds needed to close||$4,938|
I took this Loan Estimate and sent it to another lender with competitive rates and asked them to beat this offer. We’ll refer to them as Lender 2. The Loan Officer came back to me in a couple of hours and told me that he not only beat my offer but he was going to save me $4,000 in the process. I told him that was great and asked to see their Loan Estimate so I could make a comparison. Here are those same figures on his Loan Estimate:
Lender 2’s Initial Loan Estimate
|Appraisal, Credit, Recording Fees||$770|
|Funds needed to close||$910|
The $4,000 difference is there based on comparing how much money I would have to bring to closing ($4,938 vs $910) but a large portion of that was due to the fact that he increased my loan amount from $335,000 to $337,500. He even did this after I asked him to leave the loan amount the same so that I could make a true apples-to-apples comparison. The rest of the difference was from the Title fees, which I am allowed to shop for anyway (more on that in a moment). When it really came down to it, his offer was only better by $238. A side note to this interaction is this Loan Officer was also non-commissioned. Keep in mind that not all non-commissioned Loan Officers are created equal.
Next, I took Lender 2’s Loan Estimate and give it back to Lender 1. I then asked them to beat that offer. They not only beat it but blew it completely out of the water. Here are my final costs from Lender 1:
Lender 1’s Final Loan Estimate
|Appraisal, Credit, Recording Fees||$770|
|Funds received at closing||$1,874|
I was able to use one lender to leverage a better deal from the other lender, which saved me $2,976. By knowing how to read a Loan Estimate, I was able to compare them to each other and determine the best deal.
Saving on Other Fees
Like I mentioned above, you can shop around to save on Title expenses – this can save you a ton of money! Some lenders have their own Title Company and they tend to have above-market rates. If you don’t bother to shop around you’ll end up leaving money on the table. Lender 1’s Title fees were $2,443 originally. I sent one email to one of the largest Title Companies in the country and they gave me a quote for $1,225. As a result, I was able to save another $1,218, bringing the total savings on this particular shopping trip to $4,194. Not bad, right?
The unfortunate truth is that this took a lot of effort, including my time, my professional skill set, a massive Excel spreadsheet, and some uncomfortable conversations with a few Loan Officers. Suffice it to say this will not be doable for some people, but fear not! Achroma has you covered.
If you find yourself shopping for a mortgage and you have two or more Loan Estimates, then email them to firstname.lastname@example.org and we’ll take a look for you. The only other piece of information we’ll need is a rough estimate of your credit score. Your lender provided this to you with your Loan Estimate already. Once we receive your email we’ll do two things:
- We’ll price out your loan scenario to see if we have a better offer. If we do then we’ll send you a free quote and a link to start an application if you want to get a Loan Estimate from us.
- We’ll also run a comparison on your current Loan Estimates and provide you with feedback on which deal is best.
And to top it all off, if you send us your Loan Estimates for comparison then you’ll get a $20 Amazon gift card just for trusting us to help you. Don’t waste more time and effort trying to shop the old-fashioned way. Take full advantage of Achroma’s digital mortgage solutions today!