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How new reforms affect mortgage shopping

Posted by  on Mar 20, 2011
 

Shopped for a car lately? If you're like most, you go to dealerships, look at the sticker prices, and then sharpen your pencils and sit down with a salesperson and hash out a deal. You may go back and forth to several dealerships and salespeople before ultimately buying the car. And you probably hate the process.

A Kelley Blue book survey showed that 66 percent of folks hate haggling, so you'd think that when Saturn introduced one-price-for-all sales on its cars, shoppers would be joyful. But they were not -- in that same KBB.com survey, only 12 percent of shoppers thought "full sticker price" was fair. Most people hate bargaining but think that they get a better deal by doing it.

So how does this equate to comparing mortgage quotes?

Not too long ago, shopping for a mortgage was similar to shopping for a car. You got a few quotes from several lenders, either online or by calling them up, and then sat down with a loan agent and went through the Good Faith Estimate, line by line, trying to shave some off the lender fees. You might have gone back and forth between several lenders and loan agents until you wrung every last dime you could out of them.

You successfully deployed your superior bargaining skills and patted yourself on the back, knowing some sucker out there will be paying more, while you'll be paying less.

Unfortunately, this isn't how it works anymore.

One price for all comes to mortgage pricing

Well, mortgage reform is doing away with some of the haggling. Because while everyone is focusing on provisions that make it illegal to charge some borrowers more than other borrowers, what has gotten lost is that it is therefore illegal for lenders to cut anyone special deals. There is no longer anything to be gained by haggling with an individual loan officer -- he or she has no authority to drop your charges.

What you can do to get the best mortgage rates

Different mortgage lenders will still charge different rates and fees for the same loan. They vary in their efficiency, their desired profit margins, and the volume of business they do. So you will still need to shop aggressively if you want to lowest mortgage rates available. But you won't be bargaining with individual loan officers. You'll only need to compare the rates from one institution to another, which will make it easier (if less satisfying to you gung-ho bargainers).

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