Mortage rate shopping - timing question

[TheThirstyStag]

Hi all,

I just put in an offer on a single family home today and I am a first-time buyer.  I am wondering what most savvy mustachians do when they shop for the best rate.  Here's where I am:

Prior to starting my house hunt with my agent, I spoke with two lenders for pre-approval on a 30-hr conventional loan and obtained two pre-approval letters for use when making an offer.  One of the lenders said to contact them again when I'm ready to do so and they'll update the letter to reflect a pre-approval amount closer to my offer amount (so we don't fully show our cards).  This was great and exactly what I did today.  In doing so, I established a relationship with this lender (who also works with my realtor's clients often) and when we were drawing up our offer letter my agent was kinda surprised when I mentioned that I would like to shop for the best rate and may not use this lender, but he understood.  He wrote the offer letter to allow for financing through any other lender.

My offer expires on Tuesday, but my realtor suggested I shop for rates ASAP.  How does the timeline work here? I assumed that once an offer is excepted, the buyer (me) fully secures financing with a lender with a real approval and a rate lock.  Our closing date would be about 50 days away if all goes well, but most rate locks last 30 days.  So I guess my question is: do I still shop around this week for more pre-approvals and seek a full approval with rate lock to occur within 30 days of closing?  Or do I go ahead and apply for real approval right now? 

Also, what should I ask for other than rate and a good faith estimate of all closing costs?  Basically I want to find the best rate and secure it without jeopardizing my potential closing timeline (big if, considering my offer could be rejected).

Thanks in advance.  Everything happens quickly and this is very new to me.

[mr_orange]

I'm assuming you have a financing contingency in your contract.  That should tell you how long you have to goof around with things.  This is typically under 3 weeks in Texas.  Your area may be different. 

Amerisave.com generally has a good matrix of rate/point scenarios.  Zero yield spread loans in trade for higher closing costs will generally save you money over the life of the loan.  I would suggest using this online site to get the best deal.   The Mortgage Professor also has a list of Upfront Mortgage Lenders here:

http://www.mtgprofessor.com/a%20-%20umls/list_of_upfront_mortgage_lenders.aspx

Any of those would be good choices too. 

[sol]

I comparison shopped rates the same way this forum has previously suggested you shop for cars.  I got a written offer and took it to another lender, who happily beat it.  Rinse and repeat until everyone except one lender says "No, I can't beat that" and then you're done. 

The difference in final offers between lenders was about a full percentage point.  Like some of them dropped out at 4.25% and told me they couldn't go any lower, while other lenders continued to compete down to 3.25% for equivalent fees.  I think it strongly depends on the particulars of their current loan portfolio.

[TheThirstyStag]

Thanks for the great suggestions.

Sol, how far in advance of your closing date did you do this comparison shopping? 

[sol]

Sol, how far in advance of your closing date did you do this comparison shopping?

I started making calls as soon as the seller had accepted our offer.  I spent maybe a week doing the shopping around.  On day one I gave my info to Lending Tree, and I had like ten different lenders call me over the next few hours.  Most of them were hard-charging high-pressure salesmen who wanted to chat for an hour about their level of customer commitment and the intangibles that they thought should sway me towards accepting a higher rate.  I kept telling them I was going with the best deal, and I had to hang up on a few of them who weren't getting the message.  This process is all about getting offers and then beating offers, and if they're not doing one of those two things then they're just wasting your time.

[mr_orange]

I did a quick search on Amerisave today using the calculator on the homepage and it still gives you a pretty good rate/fee matrix.  If you find lenders with better rates please let us know.  I have found the rates on Amerisave to be very competitive. 

For your questions about locking loans you should look through the threads here:

http://www.mtgprofessor.com/locking.htm

[TheThirstyStag]

Thanks, guys, for the great advice.

If all goes well, I will be under agreement soon with a closing date of about 45 days out. 

This may be a very elementary question, but when shopping around, do you actually pay a bunch of application fees?  Preapprovals cost nothing, but from what I understand, actually applying for the mortgage and seeking a rate lock typically costs $$.  Am I looking at this wrong, or are people shelling out hundreds of dollars to shop around?

Also, I don't know much about Amerisave.  I'm still in the local brick-and-mortar bank mindset.  Are they reputable?

[mr_orange]

Any of the banks on the Upfront Lenders list above are reputable and are scrubbed by a Professor Emeritus of what many consider the finest business school in our country.  I think he is pretty reliable as a source of truth.

You used to be able to ask for Good Faith Estimates (GFEs), but Dodd/Frank has changed things a bit.  I'm not sure if those still exist, but there should be an equivalent now. 

Again, I'd be surprised if you get a better deal that what Amerisave offers.  If you do please share what you find with everyone. 

[Dicey]

For the first time, I shopped multiple lenders rather than using a mortgage broker <she raises facepunch shield and ducks>. What a colossal, fucking pain in the ass!
Commenting just to follow, because if there's a better way, I want to know about it.

[TheThirstyStag]

I'll check out some of the upfront lenders.  What about the question below?

This may be a very elementary question, but when shopping around, do you actually pay a bunch of application fees?  Preapprovals cost nothing, but from what I understand, actually applying for the mortgage and seeking a rate lock typically costs $$.  Am I looking at this wrong, or are people shelling out hundreds of dollars to shop around?

My execution date is today and the clock has started.  My mortgage application due date is in 9 days and my mortgage commitment date is in 34 days.  Closing is in 47 days.

[mr_orange]

You should be able to get good faith estimates from each company without a lock.  The biggest issue with this process traditionally has been that the companies you're dealing with are not honorable.  They tend to change the terms at the last minute or the broker does this.  If you start off dealing with Upfront companies the likelihood that this will happen should be pretty low. 

I wouldn't pay for a bunch of locks with different lenders.  Shop them and lock with the one with the best deal. 

[Bracken_Joy]

Following, as I'll (hopefully) be here next year. May as well learn now. Please keep us updated on what you learn!

[TheThirstyStag]

So I started selecting information through the mortgage professor's Certified Lender Network (CLN) and it quoted me a rate of 0.125% lower than a comparable quote at AmeriSave.  If I continue on the professor's site, I'm asked to select one of 4 lenders, the highest rebate offered by goodmortgage.com, and enter contact information. 

This is legit?  It feels like I'm gonna get spammed and I don't know what happens next.  Do they contact me and I send them firmer data (pay stubs, SSN for credit check, etc.)? 

[sol]

What happens next is that a salesperson calls you and tries to convince you to turn down their intro offer and accept a higher rate.  Just ask for their best offer for the product you want. In writing, though I probably wouldn't expect a full GFE so early in the process because those take time and you're just going to have someone else beat it tomorrow.

I would expect all four of them to call you.  Tell the first one (mine took about three minutes to call after I submitted) that you're shopping lenders to see what's available.  Ask the next three to beat the best offer you have in hand.  Call them back to give everyone a chance to beat it, and don't be surprised when their "absolutely the best I can do" becomes "we really want your business and can definitely beat that" tomorrow.

Don't pay anything until you get an offer that nobody else will beat, then get the GFE, read the terms very very carefully because they will probably try to screw you on the back end if they can't screw you up front with the rate, and then pay to lock it.  Remember these people are in sales and they want your profit margin, not your friendship. 

They will try to confuse you with terms and then use every high pressure tactic in the book, like "this offer is only good if you lock today, tomorrow this deal will be gone."  Those people dropped off my list pretty quick.  They'll lower their lender fee but hide the cost somewhere else.  They'll lower their rate but charge you more for points.  They'll make up previously unmentioned fees at the end that weren't previously discussed.  They are just as bad as car salesman, so get it all in writing up front and then walk away if they refuse to honor out.  Do it early so you have time to start over if necessary with another lender.

Keep in mind that your mortgage negotiation of probably the single most expensive mistake you can make in your life, after not negotiating your salary.  It's worth a week of your time to get it right.

[mr_orange]

http://www.mtgprofessor.com/ShoppingReasons/CertifiedNetworkLenders.html

I can't answer your questions above and it is good to ask for their best offer and call the ones back that have previously bid.   This is just good business and is something you should do with any major "purchase."  Think of borrowing the money as a major purchase and shop around. 

The link above gives some good guidelines about the CNL. 

[eman resu]

Hi - Request a GFE from several lenders.  If you supply them name, income, SSN, address and estimate of value of property, and the amount you want to borrow they have to provide GFE within 3 days. Some will try to get you to "hold back" one of these pieces of information so that they can avoid issuing a GFE.  They'll give you something else thta is estimate-y and says "I'm not a real GFE."  Ask for the real GFE.

They can't charge you for any fees other than to pay for the credit report until you provide "intent to proceed" (after seeing a GFE).  If someone wants you to pay application fees of any kind to get a GFE or before you get to a "real" GFE, move on.   

[eman resu]

Sorry - the GFE is called the "Loan Estimate" now.  Changed in October. Ask for the "Loan Estimate disclosure form".

[TheThirstyStag]

Interesting info.  I thought that the real GFE usually only occurs 3 days after the loan application is submitted.  Has that changed?

[eman resu]

Every consumer mortgage protection regulation has its own definition of application. If you give 'em those six pieces of info then you have "applied" for purposes of the new Loan Estimate disclosure.

Compare the origination charges (Section A) under Loan Costs on page two of the LE.  Those are the fees the lender keeps for its origination services to you and where it'll show if you are paying too much upfront for what seems a slam dunk rate. Keep in mind that the person generating this form is a lender employee or a broker getting paid by the lender --- he or she has skin in the game. 

There's an APR on page 3 of the LE that theoretically expresses the total cost of all "finance charges" (boiled down: fees-kept-by-lender and interest) as a rate. You can compare this if you get two offers for same rate.  But, again, the calculation is based on a web of regulatory rules being interpreted by a person who benefits if you do the loan with them.  So don't JUST compare that. 

Unless you lock your rate, it can change along with points. The rest of the estimate has to be good for at least 10 days. Like, if you say you want to proceed in that window, they have to honor the rest of the info unless there is a "change of circumstance".  This is another web of regulatory whatnot, so if they try and change stuff down the line ask them what the change of circumstance is.   

[TheThirstyStag]

Here's what I ended up doing:

In addition to giving my information to have the mortgage professor's CLN lender contact me, I solicited 5 other proposals by emailing 5 other lenders, in addition to my pre-approval lender (So 7 lenders total).  These ranged from national branches, to regional lenders, to credit unions, to online lenders (one of which I snagged from bankrate.com).  I found email addresses of loan officers servicing my area.  My email laid out all of the specifics (what type of loan product, percent down, purchase price, my most recent credit scores per my first lender, explaining our good income ratios).  I said we are selecting a lender this week and would appreciate a competitive proposal based on these data. 

Almost all of them got back to me using Monday's 10:30 rate update (Wells Fargo insisted that I call them back, so I never actually got around to that).  Some were casual (quote written in email), others were more formal with a loan proposal form, another gave me a loan estimate form.  Rates ranged from 4.25 to 3.75%.  For the record, Amerisave was at 4, but the mortgage professor's recommended lender (goodmortgage.com) was 3.75.  My lender from bankrate was also 3.75, but had 750 in fees as opposed to 150 in lender fees. 

My original lender was at the top of the list at 4.25 with over 1200 in fees, so I sent the 3.75 proposals and asked for a competitive counter.  They matched the 3.75 with no mention of the fees.  I had a meeting scheduled with them today and I brought up the goodmortgage quote and they refused to honor the lower lender fees of 150 (having "never heard of goodmortgage.com before"), but they did match the 750 fees from my bankrate lender.  Since this lender has worked with my agent before and is local and has a good reputation for closing on time, we decided to eat the extra 600 in fees to lock in today with them. 

I get the feeling that I could have done marginally better, but who knows.  I feel much better knowing I brought the local lender to the lowest rate for which I was quoted and received decently discounted fees. 

Anyone know about shopping around for 3rd party fees now?  From what I understand, most of these are fairly rigid, no?

[sol]

I also had salespeople tell me I should refuse competitive offers because they "had never heard of" a particular lender.  What does that matter?  One, you're clearly ignorant of your competition.  Two, I'm literally buying money so it's not like brand name counts for anything.  They either give me money or they don't.

Is there any reason you didn't ask anyone else to beat your lowest offer?  I feel like you got step one down and then quit before going to step two, and that probably cost you a quarter point or so.

[TheThirstyStag]

I also had salespeople tell me I should refuse competitive offers because they "had never heard of" a particular lender.  What does that matter?  One, you're clearly ignorant of your competition.  Two, I'm literally buying money so it's not like brand name counts for anything.  They either give me money or they don't.

Agreed.  I was kinda annoyed at that.  Also, not hearing of another lender just highlights how competitive this field is and how many lenders are out there that would jump at a well-qualified buyer like myself.

Is there any reason you didn't ask anyone else to beat your lowest offer?  I feel like you got step one down and then quit before going to step two, and that probably cost you a quarter point or so.

Well technically I did ask my lender to beat the lowest offer and that was the best they would do.  They weren't budging when I pushed, but you are correct in that I could have asked the others go to lower than the 3.75 offers.  3.75 was also the lowest I've seen advertised, even on bankrate, and it was the lowest the mortgage professor came back with, so I had a feeling that I was at a wall and anything else would be negotiating lower fees (again, nothing to snuff about).

[redcedar]

Anyone know about shopping around for 3rd party fees now?  From what I understand, most of these are fairly rigid, no?

I think that you will find most of these are set. Even where they are flexible, the front line people will be told that they are set so you take a lot of time to get to someone that will know the truth.

What fees are you interested in shopping?

Credit report - likely pulled already and vendor rarely not set by lender
Appraiser - old days yes, since mortgage meltdown not likely
Suvery if required - possibly so worth asking
Attorney - most likely and you can shop fees pretty easily
Title insurance - often tied to attorney but...differs greatly by state

[TheThirstyStag]

Anyone know about shopping around for 3rd party fees now?  From what I understand, most of these are fairly rigid, no?

I think that you will find most of these are set. Even where they are flexible, the front line people will be told that they are set so you take a lot of time to get to someone that will know the truth.

What fees are you interested in shopping?

Credit report - likely pulled already and vendor rarely not set by lender
Appraiser - old days yes, since mortgage meltdown not likely
Suvery if required - possibly so worth asking
Attorney - most likely and you can shop fees pretty easily
Title insurance - often tied to attorney but...differs greatly by state

Yeah I figured most of the 3rd party fees are fairly rigid.  My question was mostly in reference to title fees, as the loan estimate form lists them in an area labeled "you may shop for these"

I do live in a regulated state, though.

[eman resu]

For the "can shop for" services, they should have given you a list that includes at least one servicer in your area for each service.  If you went with a local, brick and mortar-y lender that might be a good place to start.  Might not be the cheapest, but is likely someone the lender is confident with in terms of the service getting done and turned back to them (what they care about).  There's not any actual assurance of quick/good service there,  but something to consider if time to closing is an issue.  Also, the total fees paid for services in that section of the estimate, cumulatively, can't go up more than 10% IF you select from the servicer list they give you. The bank has to pony up the difference as a cure to you if it goes over that tolerance.  You don't come off like someone willing to blindly accept 110% of one estimate as "good enough" (nor should you be!) but there's at least a potential ceiling there FWIW.