Rate Shopping

Almost every week I have the same discussion with a potential new client that starts with &8220;What are the current rates?&8221;  The potential client does not provide any additional information: what product they are the are interested in, whether they will need a conforming or non-conforming (Jumbo) loan, will they be refinancing or purchasing a primary residence, 2^nd home or an investment property, do they intend to provide Full documentation or do they need to state their income, how much down they might be willing to put if anything, are you willing to pay points, etc.  Just &8220;What are the current rates?&8221; 

Usually, I will back-track with the possible client and get most of this information before I provide them with rates.  But often, I am cut short and am told they are rate shopping.  Again, I explain to the potential client that rates vary with the situation.  For example, a 30 year fixed mortgage, full documentation with 20% down for a primary residence may vary by over a point in rate from a non-owner occupied home and will vary even more with other products.  I could provide the rate for a 30 year fixed mortgage at 3 points for a non-conforming loan or at PAR (zero points) for a conforming loan.  Do I use a 15 day lock instead of a 30 day lock?  Is there a pre-payment penalty with either product?  Unless the client does his du-diligence, they will not be in a position to compare rates.  To be really useful, the potential client has to make sure he/she is comparing the same product under the same condition set.  This includes ensuring all fees are the same.  Some lenders charge back end fees thru escrow which affect the rate.  Other&8217;s don&8217;t.

I am a professional mortgage loan officer.  I do not negotiate rates.  What I do is offer my clients service, professionalism and the best deal I can at that moment.  Our rates are very competitive and are more often than not one of the most competitive rates available.  If I was to try to negotiate a lower rate, this would tell my client I could have given them a better rate in the first place.  Still, rates may change on market conditions or my clients may come back to me with a more competitive offer.  Often, I must tell my client I cannot match my competitor&8217;s rate and for them to take the deal.  I must laugh at this point because even though I supposedly do not have the best rate, I often get the deal, the commission, the future commissions, and now have a loyal referral agent for life knowing they can trust me.

Lastly, the rate shopper has to be aware that the Good Faith Estimate (GFE) is not a binding agreement.  Mortgage brokers use a GFE to hook the client.  By the time the client realizes that what they are getting isn&8217;t what was stated on the GFE, it is either too late to find another lender or back out of the deal.  If what is being offered sounds too good to be true, it probably is.

So next time you need a mortgage loan officer be sure to do your du-diligence.  A small mistake can cost you thousands of dollars.