We sometimes lose pre-approved “rate shopping” borrowers long before they are even in contract. This is frustrating for us b/c our full pre-approvals take two to three hours of time, and b/c we have not even formally quoted rates yet (we only estimate rates when we send out payment scenarios).
In any case, we like to remind everyone that there is far more to a purchase transaction than the interest rate – like integrity, service, speed, reputation, skill, etc. Here are a few things for borrowers to consider:
1. Lenders can quote anything before a borrower is in contract, b/c lenders know they will not be held to the quote b/c rates change. Lenders are not supposed to do this, but they do.
2. Lenders often quote rates that are only available for very short term locks when a borrower is fully approved and loan documents are ready to be drawn. If rates increase between the time of the quote and the lock, the borrower has to take a higher rate.
3. Rates move every day, so a rate quote prior to contract is effectively meaningless.
4. Lenders that compete on rate often lack the skill and experience to navigate purchases. We blog about this constantly, but there are many issues that inexperienced loan officers miss all the time that blow up transactions. We know for sure b/c we often inherit those transactions.
5. Listing agents won’t accept offers from unknown lenders or lenders with less than stellar reputations. This is the “biggie.” Listing agents are all too aware of the risks posed by inexperienced lenders. If buyers want to get their offer accepted, they need to use a highly reputable lender.
6. Borrowers are often unaware of how painful poor service levels can be, until it is too late. 11th hour conditions, transactions blowing up, and a total lack of communication are only a few of the problems that arise. We always encourage borrowers to read the Yelp reviews of whatever lender they’re using; they are very telling.
7. Rate affects the overall payment much less than borrowers realize. For example, a 1/8% difference in rate might mean a $36 difference in payment for a $500,000 loan with a total payment (PITI) of $3,400 or more.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167