Mortgage Daily Logo

How to Shop for Mortgage

Mortgage News

Q: How many price quotes should I get in refinancing my mortgage?

A: Get as many valid quotes as possible. Two or three valid ones help; 10 phony ones are worthless, or worse.

Valid price quotes must meet three major conditions:

  • Same market timing: All quotes must be as of the same day, since mortgage lenders reset their prices every morning. Comparing A’s price on Monday with B’s price on Tuesday is looking for trouble.

  • Same transaction features: Valid price quotes are based on the same assumptions regarding the features of your transaction that affect price. These include the loan amount, property value, type of property, zip code of property, lock period, whether or not you are waiving escrow, your FICO score, and whether you are occupying the house or renting it. And on a refinance, you must indicate whether or not you are taking any cash out of the transaction.

    If you don’t specify all of these factors, the lender will probably assume the best so the price quote will be as low as possible. For example, if your home is a duplex, which usually commands a higher price, and you don’t indicate it in soliciting a price quote, the lender will assume that it is a single-family home because that commands the lowest price.

  • Absence of low balling: Even if you specify all relevant transaction features, some loan officers will quote a price below the price they could actually deliver that day, a process called low-balling. The purpose is to win the bidding contest with other LOs so that you will come back.

If you do come back, the low ball price quote will be explained away either by changes in the market since the original quote, or by transaction features that you neglected to mention when you solicited the original quote. Indeed, low-balling. is most likely to occur with borrowers who request a price quote without specifying all the relevant transaction features that affect the price.

To obtain prices on my website, shoppers must enter all the information that affects prices — otherwise the prices don’t appear. Prices are shown for each lender, they are always current, and they are received directly from each lender’s pricing system, bypassing the lenders’ LOs.

Is Zero-Plus Mortgage Good Deal?
Q: The zero-plus mortgage has no origination, underwriting or processing fees and gives the borrower a $1,000 closing credit. Will it save the borrower a bundle, as advertised?

A: This question can’t be answered definitively without knowing the interest rate charged and all the transaction features that affect the price. Nonetheless, I am quite confident that the answer is no because this lender is doing nothing more than giving a special name, and tying a ribbon around, a standard option that all lenders offer.

To illustrate the point, I shopped for a 30-year fixed-rate loan of $380,000 on April 14 and was offered 16 combinations of interest rate and lender fees. These ranged from a fee of $10,485 with a rate of 3.75 percent to a credit of $22,325 at a rate of 5.625 percent.

Within that distribution is another option, consisting of a rate of 4.375 percent and a credit of $1709. If I retained that rate but cut the credit to $1,000 and called it “The Lender’s Special”, it would have no origination, underwriting or processing fees, and it would provide a $1,000 closing credit. But it would be a rip-off rather than a bargain.

Take Home Equity Conversion Mortgage Now or Wait?
Q: I am 62 and won’t need any funds till I stop working at 65. Should I take a HECM credit line now and sit on it, or would I do better to wait three years and take it then?

A: If you take a credit line now and let it sit unused, the line will grow at a rate equal to the mortgage interest rate plus the 1.25 percent mortgage insurance premium rate. If you wait three years, the initial line will be larger because you are three years older and (presumably) your house will be worth more. In working the numbers, I found that with an annual house appreciation rate of about 2.5 percent, it was a wash. If you expect appreciation to exceed 2.5 percent, you do better by waiting, and vice versa.

Related Posts

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Third-Quarter 2012 Mortgage Litigation Index

Lawsuits involving excessive fees, servicing fees and loan fees beyond state maximums. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Fannie Mae and Freddie Mac Orangeburg County, Richland County, South...

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Whistleblower Lawsuits

Litigation related to loan servicing, including escrow issues, transfer of servicing and servicing borrowers in bankruptcy and foreclosure.   Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Bank of...

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Net Branch Lawsuits

Litigation involving net branch operations. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story PHH Mortgage Corp. Mathews Supreme Court of Virginia na Court held that the term "branch office" includes not only...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming paperwork has been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and furniture need to...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand-new mortgage loan can be a difficult task, especially for first-time homeowners.   After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first...

Newsletter

Don’t worry, we don’t spam