You know the most interesting question I always get when working with the new customer is “What’s your rate?” It’s a legitimate question but one that’s not as simple or easy as customers expect it to be to answer. The reason is that over the last few years in the name of consumer protection, the industry moved to a pricing model that now considers multiple factors when setting your interest rate. It’s difficult if not impossible to know in a preliminary call with someone seeking a new mortgage how each of these factors impact the interest-rate. Before the real estate and housing market crash of 2007 mortgage pricing was simple. Fannie Mae & Freddie Mac set a base rate in the marketplace and that was that. You might have to pay a little extra if you wanted to pay your own property tax bill or if your lender was higher cost. Today several factors impact your end rate on your loan. Your credit score, loan-to-value ratios, the size of the mortgage you plan to take out can all impact your rate by as little as .125% or as much as .500 by the time everything is factored in.
Customers often shop for a mortgage with the call center mentality. They have been trained to do so over the years. Honestly, it’s a good starting point but it isn’t enough to get a firm quote. The challenge if I am receiving your call as a consumer I may come off as evasive or unwilling to make a commitment to win your business when what I am really doing is hedging based on the variables that I must deal with and don’t have information about yet. What customers don’t know is that many other lenders either by inexperience or worse, by strategy, are willing to represent that they about committing to a rate, but know full well they have more information on the consumer and will spring it on them later, after the credit report after the appraisal etc. that You’re no longer eligible for the price you were quoted on the phone. They know that you will be unwilling to change lenders after going through the hurdles needed to get your loan up and running. So they figure to lose nothing but reputation on the backend, so they lie by omission today and they win the business today and figure the rest out later. The fact of the matter is to get an accurate mortgage quote you must let your lender take a look at your credit score and be reasonably certain about the value of the property. If your lender is honest their information, you just have a basic rate discussion and mention the variables that could negatively affect you the consumer going forward. That’s the best you can get up front.
Remember one of the challenges in the mortgage business is you don’t know that you’ve selected the wrong mortgage lender to work with until it’s too late to change lenders. Choose wisely and remember if someone is telling you something that seems a bit too good to believe…it is.