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The Art of Shopping for Your Mortgage

Posted by  on Jun 17, 2009
 

Has this happened to you? You called a couple of mortgage lenders, talked about rates, and got a some interest rate quotes. The next day you checked with another one, and the online guys you emailed for quotes on day three got back to you later that day or the next morning. On day four, you went through all the information like a good shopper-- APRs, rates, and fees. You combed through the Good Faith Estimate (GFE) and Truth-in-Lending (TIL) disclosures. Then you called the lender with the best deal.

The Disappearing Mortgage Rate

Except that deal was long gone. The new quote is half a point higher! Is your agent a lying dirtbag? Maybe….but unlikely. The problem for rate shoppers (and lenders too!) is that rate quotes are based on pricing in mortgage-backed-securities markets (and treasuries as well), which are driven by the same things that cause changes in the stock markets. And everyone knows how quickly prices change there.

Mortgage Interest Rate Quotes: Timing Is Everything

While mortgage bankers and brokers could usually offer the same rates for several days, today they rarely go a full day without having to change prices to accommodate market movements. Today's lenders also have to work with much smaller profit margins to stay in business, and a market-based price increase can't be absorbed as easily. The good thing about this is that pricing improvements are also quickly passed on in the interest of remaining competitive. But a quote obtained one day probably can't be compared realistically to one picked up a couple of days later. And until you actually lock in your loan you still can't be guaranteed a rate.

Shop Smart: Get Your Disclosures ASAP (and Price Isn't Everything)

Try to get all your quotes within a short time period so that you can make reasonable comparisons. The right loan is an important part of your entire financial plan. You wouldn't let any hack arrange your stock portfolio--get an expert for your mortgage too. Interview until you find a trustworthy and reputable loan officer who will want your business again and again and be motivated to provide you with a good experience. When you work with someone you trust, you can stop frantically checking bond market movements a dozen times a day and relax, knowing that you will be treated fairly regardless of where rates have moved when you are ready to lock your loan.

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