How to Mortgage Shop

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How to Mortgage Shop

• By Jon Boyd, Broker
• The Home Buyers Agent of Ann Arbor, Inc.
  http//hbaaa.com

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4 Basic Steps

• 1. Choose loan type prepare to gather data
• 2. Gather quotes from lenders
• 3. Identify Fees that ARE NOT LENDER CONTROLLED
• 4. Calculate the value differential to make a
  decision

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1. Choosing Loan Type

• 1. Buyers Credit
• 2. Desired down payment
• 3. Idea of what rates will do in future
• 4. How long in the home
• 5. Level of risk buyer is comfortable with
• 6. Monthly payment range

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Rational Limitation

• This method is valid for loans that are fixed for
  at least five years
• The market typically is set for a lender break
  even at 60 payment for points charged
• 0 pts, 6, 100,000, 600/m
• 1 pt., 5.75, 100,000, 584/m

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4 Things Must Be Held Constant

• 1. Type of loan including credit profile
• 2. Amount of loan
• 3. Lock period
• 4. Day, and ideally the time of the quote

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IMPORTANT!

• When you contact the lender ask for the rate they
  can lock you in with Right Now!

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2. Gathering Quotes

• - Need a general idea about paying points, i.e.
  about zero points
• - Lenders appreciate you knowing what you are
  after, but they may be offended by you asking
  about their specific fees
• Most lenders dont like to be shopped

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Example Request

• Buyers credit score is 725, Im looking for a
  30 day lock on a 180,000 loan with zero points.
  Can you tell me what your rate is to lock today
  and what your costs are like?

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Pay attention write it down

• It may be easier for you to use the line numbers
  on a HUD-1
• Once you do this a couple of times you will get
  an idea about which lenders charge which fees

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3. Identify...

• 2 items that we feel are OK for the buyer to pay
  for 50 credit report 275 appraisal
• 900 items
• 1000 items
• 1100 items
• 1200 items
• 1300 items

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4. Calculate

• 1. What is left is junk fees
• 2. Sometimes lenders will move things around, but
  it becomes very clear at this point
• 3. Add up the junk fees
• 4. Add up the PI for 5 years
• 5. Add junk PI for each lender

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Results of a comparison

• Lender 1 66,266
• Lender 2 71,089
• Lender 3 64,751
• Lender 4 66,996
• Lender 5 67,799
• From 2 to 3 6,338 Value differential
• 3 compared to average, 3,036

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Final notes

• 1. We sometimes use a spreadsheet to automate the
  calculations
• 2. E-Trade Mortgage Fair Compare
• 3. If you mortgage shop much, the GFE form
  becomes irrelevant
• 4. It is easy for a mortgage originator to
  mislead home buyers and agents with a GFE