Ok-you now understand what to look for in a loan officer based on my previous post. Now let’s talk about rate shopping. But, let me be clear, shopping for a rate and not taking in consideration the person or entity that will orchestrate the rate to the finish line is crazy. I have seen to many times, people changing rates from one lender to another only to become very frustrated due to excess fees, or delays.

With that being said:

1. If it seems too good to be true, it probably is. Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, then you better ask a few more questions. Is there a prepayment penalty, are there extra fees, what is the length of the lock-in.  Many quotes that are given are for the shortest lock (meaning 7 or 15 days). In reality, you will not get your application turned around in that amount of time, therefore you would need to lock in for a greater length. Locking in for a longer period costs you more in points. Also if fees are minimal, is it built into a higher interest rate?

2. You get what you pay for. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process in the hands of the lowest bidder. Best case, expect very little advice, experience and personal service. Worst case, you may not close at all. Some times it is too late and yo find out that you can not close (especially with all the changes in the mortgage guidelines) and now when you go out to find another rate and source the rates have increased. Or course if you want the cheapest rate, head out to the Internet..yikes! The stories about last minute changes, increase in rate and fees or worse yet, not closing on time are usually Internet transactions. Ask any competent Realtor and they will suggest (demand) that you speak with a local experienced lender. This is the largest financial transaction you will more than likely be involved in, don’t risk it.

3. Compare apples with apples. First, make sure you are comparing quotes from the same day. Second, review lender fees and points against another lender fees and points. What I mean is that if you look at the bottom line, some lenders may skimp on the third party fees in hopes that it makes them look less expensive.

4. Understand that interest rates and closing costs go hand and hand. This means that you can have any interest rate you want, but you will pay more in points. On the other hand, you can have less fees, discounted points or no costs at all but you will have a higher interest rate. One strategy is not better than the other. It depends on your current situation and long-term goals. A professional loan officer will guide you through this process.

5. Finally, you must understand that interest rates and points can and do change daily and even hourly. If you are comparing lenders, this is a moving target on an hourly basis. For example, if comparing two lenders, you must get a quote from each of them on the same day and at the same hour to be exact. You must also know the length of the lock as well to compare the tow lenders. As mentioned above, one could quote a 15 day rate and another a more realistic 45 day lock.

Bottom line, ask the right questions, determine which lenders are competent and will provide the service that is required on a transaction as big as this and then if choosing between two compare on the same day.