Top Chicago Realtors are infamous for referring their favorite mortgage lending partners to their clients. They refer lenders who they trust to get the job done, and who deliver on their promises. Instead of shopping a lender’s customer service ratings or industry experience and reputation, homebuyers shop lenders primarily for interest rates and closing costs. What most do not realize is that their individual financial situation, as well as the property being purchased, has the greatest impact on their obtainable interest rate and closings costs.
The 5 most common mistakes to avoid when shopping for a lender:
1. Select the lender who quotes the best price over the phone or internet.
It is nearly impossible to enforce the practice of lenders providing accurate interest rate quotes, especially over the phone. Rates are only final until locked, because interest rates are constantly changing. Lenders assume best case and standard loan parameters when they receive a “rate shop” call. Rates, and pricing, vary according to loan size, type of house, purpose of purchase, credit and ability to document income and assets.
2. Shop a lender today and another lender tomorrow.
Due to market volatility, interest rates and pricing change constantly, daily, and without warning just like the market shifts daily. When shopping rates, points, closing costs, or credits, it’s important to shop when you’re in a position to lock in a rate and decide on a lender. Get rate quotes the same day, and the same time of day, if possible. (And, remember mistake #1).
3. Do not provide your documentation until after you decide on a lender. This goes hand in hand with a common mistake in assuming that you have great credit and qualify for a mortgage. Credit scores change on a monthly basis, your income may not be eligible for conventional financing, and your assets may not be allowed in conjunction with the purchase depending on its source. Any of the fore mentioned can limit the type of financing available to you and negatively impact your ability to secure desired terms.
4. Choose a lender solely based on the lowest interest rate. Profit margins for mortgage lenders are tighter than they have ever been. If a lender offers you an under market interest rates it’s because they need to increase their mortgage application volume. WARNING: When application volume is higher, customer service and deadlines are compromised, which bottom line could result in missing your mortgage contingency and contract dates! (Remember mistake #3).
5. Shop closing costs and APR; that’s it. Again, lender profit margins are tight. Closing costs are very similar lender to lender, and the primary fee that a lender controls – and that you can negotiate – is the loan origination fee(s). An origination fee consists of the lender’s fee, and any fee that you’re paying for the interest rate you desire.