“I can’t wait to shop for my mortgage!” Said no one, ever.
When it comes to the tasks associated with buying a home, shopping for a mortgage may win the award for least desirable action. Let’s look at the reasons why some people don’t shop for a mortgage loan and provide simple solutions to improve outcomes all around. After all, the financial impact of a mortgage loan will last years, perhaps decades, beyond the few days required to identify the best mortgage lender.
Reason 1: You didn’t realize you could shop. If you fall into this category – we’ll save you the embarrassment and get it over with quickly. You can always shop for a mortgage – even if your Realtor or Financial Advisor has an “in-house” lender or mortgage broker. Generally speaking, any “in-house” lender or mortgage broker is paying (one way or another) for this privilege. This can, and likely does, have an impact on the loan terms offered – ultimately delivering a less than desirable result for you in the form of inflated fees or interest rates.
How to fix it: Great news! You just did. You now know you can shop – so do it! You are in charge of your own financial well being and any “pain,” perceived or otherwise, that may come with shopping for a mortgage will be short-lived compared to the consequences of overpaying on a mortgage for 30 years.
MortgageCS is an unbiased mortgage resource, so we can’t help but suggest you use MortgageCS.com to ensure that shopping is efficient and hassle free. There is no other place where you can easily company mortgage options without a bombardment of phone calls and undesirable credit report inquiries.
Reason 2: You believe all mortgage companies offer the same rates. This one is just about “as a matter as fact” as it gets. When it comes to the rates offered by mortgage brokers and lenders, their operational structure does a good deal of the talking. A few differences to look out for include:
- Layers of management: Mortgage companies earn the bulk of their revenue when they originate new loans. Accordingly, a company with multiple layers of management will have more “mouths to feed” from each loan compared to a mortgage company with less management.
- Office location(s): When it comes to overhead expenses for a mortgage lender, just about nothing exceeds the combined expense of banking licenses and equipment for a physical location. Not only does each physical location need to spend several thousand dollars each year to maintain their banking licenses in each state, but they also need to pay for the office equipment, fancy desks and signs, and all other expenses.
There are several other reasons why rates can vary between lenders, but rather than describe the depths and complexities of the secondary market, we hope you may take our word for it!
How to fix it: Again…you just did. You now know that different mortgage companies offer different rates and fees in order to support their operational structures and overhead expenses. Accordingly, a rate that may seem “impossible” for one lender, may actually be provided by another lender on an everyday basis.
Reason 3: You are afraid to shop. Shopping for a mortgage involves all types of new terms, a market that changes at least once a day and pressure from all directions to meet your purchase agreement deadlines. Factor in the pressure from a real estate agent telling you that the “only one” that can close on time is their mortgage professional and the fact that we, as humans, don’t like to tell people “no”, and you have an environment which can quickly become overwhelming and scary.
How to fix it: Remember that you are in charge of your own financial future. Real estate agents work hard to ensure the property sale transaction goes smoothly- but they are not compensated one way or another based on the terms on your new mortgage loan (and they don’t need to make the payment either). While many mortgage originators stationed inside a Realtor’s office may offer ultra-competitive rates and may have a great reputation for getting to the closing table on time, don’t forget Reason 1 or 2 from above.
Also know that a pre-qualification doesn’t require that you continue with a particular mortgage lender. Up until the time when you are required to obtain a loan commitment, you have the option of shopping and searching for the loan terms which best suit your financial goals going forward.