What’s wrong with calling lenders for rates?
Besides the fact that rates change constantly and you’re not guaranteed the rate unless you’re locking in at that 
moment? You, my dear, are an “up-call”. You will be transferred to the next available Loan Originator.
Calling mortgage companies (including banks, credit unions and any mortgage source) for a random Loan Originator means you’re playing roulette with the person you’ll be receiving the quote from. You are complete strangers. You have no idea about the how capable, experienced, skilled or service-oriented the LO is. The LO just needs to be able to read a rate sheet and talk on the phone!
LOs are typically assigned a specific day to be catch calls from people who are blindly calling around for mortgage rates. Most LOs love up-calls. They’re fed leads that day and offer rate quotes, answer questions…spend a little time with the caller and if they don’t secure that transaction, it’s no sweat. The phone will ring with another shopper soon.
Up-calls are not attached to a source of repeat business, such as a past client, real estate agent or financial planner. Up-calls have “no-strings-attached” and are a “cold lead” for business. Don’t get me wrong. I’m sure that most LOs would love to develop a relationship with whoever is calling on the other end of the line. It’s great to have clients who return to you when they or someone they know need mortgage help. Referrals from past clients, real estate agents, financial planners and blogging are my only source of business.
We have up-calls at our company (I’m sure every company does) and I have elected to not be in the rotation. It’s just not how I practice my business. If you want to talk with me, you’re going to have to ask for me or contact me directly. You will not find me by calling my office and merely asking what rates are today. You’ll be on hold until the next LO is free to talk with you.
This is why I constantly stress that the best way to select your mortgage is to get referrals from people you respect and trust. Don’t want to let your friends or family know you’re thinking about getting a new mortgage? Consider finding a Mortgage Professional who blogs (don’t worry, I’m not the only one who does!). This is a great way to learn more about that individual, their business beliefs and how they practice their business. It’s definitely better than calling a stranger for one of your largest financial investments.
My next contribution to RCG is about some clients who first went to the big-daddy of internet rate shopping. With all those banks competing for your business, you win…or at least that’s what their commercial says.
About the Author: Rhonda Porter
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What do you do if it makes sense to purchase a 4 plex if the rate is 6.5%, but not if the rate is 7%? Clearly for investors…rate matters. The investor has to know what the shortfall is between the mortgage payment and the loan payment before making an offer.
I don’t run into this very often, as most of my clients are buying homes and the difference in rate is not as big a factor on whether or not they want the house. But for investors, knowing the rate EXACTLY is more critical, and shopping can make the difference between yes I want it and no I don’t want it.
Rate matters! Saying it doesn’t many times over, doesn’t make it so. Instead of urging everyone to care less about rate, tell us how DOES a consumer go about GETTING the best rate?
Ardell, I have been! It’s all about getting referred, not doing it blind with phone calls. Working with a professional is always better than a complete stranger AND you will get the lower rate. You can still shop…but find your 3 professionals NOT THE RATES first (from referral) then ask them for rates. Make sure you do it at the same time and same day (rate shopping) and know that the rate means NOTHING unless you’re locking it in…I’ve written about this before many times at RCG.
Ardell, I don’t see where in this post I say that rates don’t matter or where I’m telling them to care less about rates?
Rhonda,
There is a repeated theme in many of your posts that the person matters more than the rate. Maybe I just don’t get it, so I need your help here.
When it comes to real estate agents, I believe the person can matter most, as that agent can get you a better price for the house, a better rate on the loan, a discount in services when getting the house ready for market. In other words, the reason the person matters a LOT when that person is the agent, is it translates into dollar savings in the long run, and throughout the entire transaction. Saving money on commission can turn into “penny-wise and pound-foolish” behavior. But it is still about the total dollar savings an agent can bring throughout the entire process, and not about how “successful” the agent is or how nice or how cute or even how well-respected by her clients.
But how does person matter when we are talking LO, if that person doesn’t have the best rate? That said, I ABSOLUTELY agree that LO as in “the person” matters if you have a low credit score or other issues that put you on the “yay or nay fence”.
But if a person who is buying a house has 30% down and a credit-score of 810…does the LO really matter…or does it boil down to best rate?
Seems to me that for the most qualified buyers, rate is the be-all-end-all. No?
Rhonda,
It can’t be “all about being referred” because too many agents always refer to the same lender. Different lenders are better for different clients. So until agents get more real about referring to best lender, and best lender not always being the same lender, people can’t rely on being referred as a key ingredient. Sad but true.
If agents took the extra time to refer the best lender for THIS client today, and not just the lender “they know will get the deal closed”, then referrals to lender would become a more valid argument. Until then…
Ardell, in keeping with this post and your comment above, if your client who is “a person who is buying a house has 30% down and a credit-score of 810″ is calling for rates (without a referral to a recommended proven PERSON) then they can still get screwed.
A rate quote is a verbal words “in the air” even a Good Faith Estimate is not a guarantee of the rate quoted. You can request your closing costs be guaranteed by a LO (watch ‘em back paddel) once you’re approved for a loan…but until you rate is LOCKED it is not guaranteed.
Rate is just one piece of the whole puzzle. Yes, it’s very important. But you cannot shop by this alone. Have the right LO to work with you is equally important as the right agent!
My clients, who are closing today thought they had a low locked in rate…they shopped using Lending Tree. The LO gambled their rate and never locked it after having their loan for over a month. How were they to know? I’ll be posting this story soon. Hopefully it will help illustrate my point better for you.
I just received notification that it has closed and I was waiting to post until then.
Ardell,
I agree, don’t think the buyer should just rely on their agents referral. They should consider two other sources of people they trust and respect (CPA, CFP, co-worker, family member, friend, etc.).
Interview three LOs from three different referral sources…narrow your choices from there.
No one asked my opinion, but if I may interject my experience here….. a Loan Officer, if given the opportunity, can usually meet and is sometimes able to beat, a legitimate rate given by another loan officer from another company. A legitimate rate is given in writing, after reviewing the borrowers loan credit information, not in an anonymous phone call, where the person on the other end of the line can say anything.
A good Loan Officer can often make or break the deal by thinking out of the box and coming up with solutions for problem borrowers or properties.
It DOES matter who makes the loan. I’ve had to pull loans from idiots over the years and had to have smart LO’s fix things to get to closing.
Marlow, no needs to ask your opinion…thanks for chiming in!
I appreciate your comment.
Still then Rhonda, maybe the point is about locking the rate or some other factor consumers need to know. It can’t all boil down to the professional. The consumer needs more info and more reliable info.
We are past the days when people are comfortable with totally relying on someone else knowing what THEY should know. We are past the days when trusting the professional in the picture is the be-all-end-all.
That is the whole point of blogging, isn’t it? People want to know more about the details so they can watch their own backs. Sure, it’s great to ALSO have a professional they know will HELP watch their backs. But no one’s putting all their eggs in that TRUST ME basket anymore…nor should they.
I couldn’t agree with you more on your post. Referral is the only way to truly find a Mortgage Professional. There are so many very hungry LO’s who may not want to know you, thus do not care if they are working by referral. Why? Because they have the mentality of “Where is the next deal”. This may be because they have a certain monthly qouta that they need to meet or it may be that it is just plain their work ethic. I once was told “Bears and Bulls make Money, Pigs do not”. If you work with someone who was referred to you they where referred to you for a reason, they do want to know you and they want you as a client for life. Don’t you agree?
Thanks, Susan. I believe that if a LO has to rely on up-calls, cold calls or buying leads, those ads promoting teaser rates we receive in the mail…they do not provide service that deserves repeat business. They need to make the most $$ on every transaction because it’s highly unlikely they’ll ever see that client or a referral from them again.
One of the problems is NO rate is REAL until it is locked. So having an LO who can lock before the offer is written would be very helpful. That used to be very doable, but harder these days.
Who has “lock and shop” programs?
I do.
I agree somewhat Susan, but wanting the lowest rate which affects you for many years, is not necessarily being “a pig”.
The original saying that sometimes the bulls win and sometimes the bears win, but the pigs almost always get slaughtered, comes from the investment arena and my previous field. Coming to mind as the best example were the REIT investments with mega high income returns that fell to $.50 a share back in the late sixties.
I agree that shaving a rate 1/8th might not be as important as some make it, and can and DOES lead to lender fraud problems. Like investors pretending they are going to live at the investment property “to get a better rate”.
Speaking of which, I think most lender fraud happens because people think it’s a good way to get a better rate. They think it is “the smart move” and don’t realize it is lender fraud. Another topic, but same idea of “best rate” is not always attainable…legally, and should not be the primary objective at times.
I often look at people like they have three heads when they MAYBE can get a loan PERIOD and then start talking best rate, and the rate someone else got. Someone needs to write the article that the guy who sits next to you maybe got a better rate because he was better qualified or had a much larger downpayment.
I just wanted to shake one buyer who wanted the best rate he heard about in the office, but also wanted to put zero down even though he could have put 20% down or more. Someone needs to explain why that is “not a match” as Dr. Laura would say
Rhonda,
When you have time and it is NOT the end of the month! can you do a lock and shop post…or link to one you already wrote here in the comments? Thanks!
I can…I’m a little hesitant to promote it because if buyers lock with up before having a property and then rates improve, they will want to break the lock. When this happens, it damages our relationship with the lenders. They track what our “lock fallout” ratios are. This impacts if “exceptions” they will make on underwriting, etc. (I just received an exception a moment ago…if my fallout was bad, the lender would have told me to “get lost”).
If a customer blindly calls a shop, it’s a bit of a crap shoot, but I often wonder if that’s any better than some Realtor referrals. Over the years, I’ve found it is pretty common to be able to do the deal for less than the LO referred by the RE Agent. I think maybe it’s because some LO’s are just great at forging relationships with agents, and not so much at working with borrowers. Or they are just fat & happy, and don’t feel the need to be ultra competitive.
But the Catch 22 is that the blind call could go to a guy like me, or it could go to lying thief, or a complete idiot. I think the best chance for a potential borrower to get a good deal is to find multiple LO’s through divergent referrals, and then compare prices
FWIW, don’t forget the wealth of information at your local escrow office who deals with lots of LO’s and can see who provides the better service and at consistently better rates/low fees for their clients.
Thanks Todd and Tim. Referrals from various sources!
Rhonda,
A lock and shop program should have a float down provision. Otherise the borrower needs to run a float up the side and have one locked and one floating, and that would not be good for the LO. Running two loans side by side is something I have needed my clients to do from time to time. Best example is when the locked loan doesn’t have a float down provision.
I’m not a mortgage broker or even in the mortgage business but I do invest in real estate. I have found that I get better deals when my mortgage broker deals with subprime lenders even though my credit and income don’t require me to be with the subprime lenders. Is this something that you have experienced with your clients. I find that typical banks and mortgage companies that deal with A credit clients basically offer a 30 year fixed mortgage and they don’t get too creative. Sub prime lenders have a whole book of products that most real estate investors don’t even know about….Any thoughts on my theory???
Rob, I do have a few lenders that I prefer to broker to with investment properties. It completely depends on the program and the buyer’s criteria. If they just want a vanilla loan, I’ll use one of my “standard” sources. If it’s more creative NOO, then I’ll go that resource….if the buyer is a-money, it may be more of an Alt-A resourse than subprime… I use whatever lending source I need to! I work with over 80 different lenders. A bank has a banks products and can broker out, but rarely do since the LO is paid less and they really specialize in what they have to offer.
Rob, that couldn’t be more false. A-Paper Mortgage Brokers have access to any loan a Sub Prime company does. Some A-Paper lenders are a little lazy, but some are just interested in putting their borrowers into a loan that won’t end up in foreclose after three years.
I shouldn’t be blogging at month end! Todd, are you saying my comment on 23 is false or Rob’s comment on 22? I might need a break!
Rob’s comment. I didn’t see yours until after I was done posting.
Don’t forget to mention the sub-prime lender who can’t do A-paper. I’ve seen a buyer fall into that trap more than once, especially among certain ethnic groups. Sometimes referrals from friends and relatives, particularly when the basis is “speaks their language”, can lead to a subprime mill and an A borrower getting less than A paper.
Ardell,
re. comment 21, are you saying you recommend buyers have two locks with two different lenders.
When people paid application and lock fees, they often would run two loans. One they would lock at time of application and pay both the application fee and the lock fee, the other they would float with only an application fee.
When it was time to close on the house, they would choose the lowest rate of the two loans.
When the float rate was always beating the locked rate, lenders started offering lock rates with “a float down” meaning the rate could go as low as the market would bear until closing, but never be higher than the rate on the day of application.
We have been in a period of rates being stable or lower for so long, that many do not have the experience of how to apply for a loan(s) during a period of rate instability.
Lenders need to have lock and float down programs for people with good credit and 20% down or borrowers need to use two lenders or more. Now that everything is “free” and there are no lock fees, that leaves lenders “at risk” I know. But the answer is not for borrowers to put all their eggs in a higher rate basket.
Rhonda:
First, good post. Referrals and a Great Business Approach are the lifeline of any solid business. You provide the latter, and your clients will provide you with the former.
Ardell:
You have some intriguing elements to your post, however I would be careful about the 810 FICO score borrower with 30% downpayment…we all know that’s an exception to the general rule (i.e. a straw man argument = logical fallacy)
Rob:
Try looking for an “Alt-A” lender (Alternative A lending)…oftentime these guys will do the same loans as the subprime heeby jeebies, but with only a SOFT prepayment penalty instead of a HARD…which means if you refi, it won’t affect you…and the prepay can be optional…it just reduces the Yield-Spread-Premium your L.O. makes.
Lastly, Ardell:
Lock ‘n Shop….try Wells Fargo. Ohio Savings used to have a Lock ‘n Shop and a List ‘n Shop, but the removed it due to non-use…Ohio’s now called Amtrust. WF should have a float down.
Ciao!
All consumers (no matter what their credit score) seek:
The lowest rate
The best service
The lowest cost (fees to obtain the mortgage)
A wide range of favorable mortgage loan products
The most favorable loan terms
The fastest route to closing with no last-minute negative surprises such as an increase in rates and fees, an unexpected change in underwriting guidelines, or a decrease in service on the way to escrow.
Rarely does a consumer end up with ALL these things happening at the same time. When that DOES happen, that loan originator and lender have a growing, thriving business. Then, of course, things change. People leave the company for whatever reason, interest rates change, loan products change…..The business of mortgage lending is a constant balancing act which makes the industry so challenging and dynamic.
When a consumer ONLY selects a mortgage lender based on interest rates alone, that consumer is an easy mark for a predatory lender, and can easily receive awful service and unexpected change in fees and terms. Logically, it is possible to find the lowest rate and receive great service, too. HOWEVER, instead, I advocate that consumers should learn to be happy with a great, low rate and stop obsessing over getting the BEST RATE or the ABSOLUTE LOWEST RATE. A consumer will drive himself or herself crazy trying to get this.
Float-downs aren’t always available for all types of borrowers and all types of loan terms, and so forth.
Some institutions that offer float downs, also offer really crappy service along with the float down, as I blogged about last week in my post on working with banks.
David and Jillayne, thanks for illustrating the point I’m trying to convey.
I LOVED Jillayne’s “things change” line. That is the whole reason behind the RESPA restrictions. They don’t mind agents referring business to good and valued and tested other services. They just don’t want the agents to feel “obligated” to do so when “things change”. They want agents to always test their referred to partners and change at the drop of a hat when “things change”.
Best always; loyalty never.
Hi Ardell
Yes, I agree with you, and adding to your observations, I would say a “change” at a corporation and all the adjustments that go along with it give corporations ample opportunities to LOSE customers and also retain customers by turning them into loyal, raving fans.
It’s when a company screws up that they have their BEST OPPORTUNITY to KEEP that customer.
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[...] 7- Rhonda Porter writes on her blog “The Mortgage Porter” When an appraisal comes in low. and on Rain City Guide:What’s wrong with calling lenders for rates. [...]