How To Get Lowest Mortgage Rates Home Loans & What Are LLPA
This BLOG On How To Get Lowest Mortgage Rates On Home Loans And What Are LLPA Was UPDATED On December 16th, 2018
INTRODUCTION OF HOW TO GET LOWEST MORTGAGE RATES HOME LOANS
Mortgage loan officers who have been in the business for several years will tell you the number one question they hear is, “What are your rates today?”
- And it’s also typical for consumers to begin shopping around for a mortgage company
- One of the first things they ask is, drum roll, “What are your rates today?”
- Consumers have long been taught to shop around for mortgage rates
- Rate aggregators spend heavily on ads promoting their sites to consumers where multiple lenders advertise their interest rates
- But by visiting such sites, it can be very confusing and the consumer turns away not knowing very much more if any than they did before logging onto these sites
- Back several years ago, prior to the mainstreaming of Loan Level Pricing Adjustments (LLPAs), an interest rate was pretty much what it was
- There was a one-size-fits-all 30-year fixed rate
A mortgage loan officer would receive the company’s daily interest rate sheet listing various rate and point combinations for their loan products. There were adjustments for loan size such as for jumbo loans but there were very few rate variances.
Lowest Mortgage Rates On Home Loans: Variable Factors Affect Rates
Today however it’s much different.
- A loan officer can quote an interest rate but any rate can change based upon the type of mortgage loan
- Rates for a VA loan, for example, can be slightly different than those reserved for conventional loans
- The amount of down payment can affect an interest rate and so too can a credit score
- That means when consumers shop around for an interest rate it might take some time to get a few questions answered before a solid rate quote can be provided
- That’s why interest rate aggregators are more interested in getting a mortgage lead to selling instead of providing information the consumer can actually use
- That’s why a loan officer should first advise a “rate shopper” that the interest rate being quoted is for a specific type of loan with a specific number of points or lack thereof
- For example, a consumer calls and asks about rates
- The loan officer gathers some basic information and quotes a rate with zero points with a 30 day lock period
The loan officer also advises the consumer that the interest rate quoted is subject to verification of the credit scores, income, and down payment funds.
How Different Lenders And Same Indices Affect Lowest Mortgage Rates
Further, and perhaps just as important, consumers need to be aware that mortgage companies all price their loans based upon the very same set of indices.
- That means one lender can’t have a 30-year rate at 2.50% and everyone else is at 3.50%
- For a conventional loan underwritten to Fannie Mae guidelines, the specific index is a mortgage bond that is traded by investors each and every day
- If there is a sizable variance at one lender compared to others, there’s something not quite right
Even hybrid loans from different mortgage companies share the same index.
ACT AS AN ADVISOR
A great way for a loan officer to “handle” a rate shopper is to act as an advisor.
- Let’s role-play for a moment and see this in action
- The phone rings and the loan officer answers
- The caller, whose name is Bill, wants to know what current rates are for a 30 year fixed rate loan with no points
- The loan amount is $250,000 and the caller will be putting down 20% of the sales price
- The loan officer quotes a 3.75% with no points and one origination fee
- Bill then responds with, “Thank you for your time but I just got a quote for 3.0%, can you match that or beat it?”
- The loan officer knows that’s impossible but it isn’t wise to get into an argument with a prospective client
- Instead, the wise loan officer will ask a few questions
- “Can you lock that rate in today?”
- Of course not, lenders today don’t lock in rates without a completed loan application
- Too many blown locks make the secondary department a little fussy
- Bill will then likely say he isn’t sure only that’s what the other lender said their rate was
- The wise loan officer might say something like, “That’s a very competitive rate given what you’ve told me and there is no way I can match it
- I’ll tell you what, give me your contact information or just call me back after you’ve spoken with the lender and ask about locking in
- If you can’t lock-in, then it’s possible this very low rate might not really be available when it’s time to lock
- The other competing lender will then validate what the loan officer told the caller originally, that rates can only be guaranteed after a completed loan application, review of credit and a property address
By advising the client and not getting into a price war, the prudent loan officer can talk more about the particular situation.
For example, where is the property located?
- What is Bill’s primary goal, getting the lowest rate or saving more on long term interest?
- Does Bill intend to hold onto the property for the long term or do you think this is more of a shorter-term transaction
- By turning into an advisor and even problem solver, instead of simply chirping out today’s rates, the wise loan officer can often beat the rate shopping merry-go-round
- Furthermore, in this scenario, Bill will see the loan officer as informative, upfront, and honest
Thus, more often than not, Bill will call back and go forward with the deal.
ACT AS A PROBLEM SOLVER BY USING THE CATCH SYSTEM
The “CATCH” system is an acronym for an effective sales system that is a “win-win” for the client and the loan officer.
- This system works best for loan officers in inbound refinance calls, but can also work for purchases
- In the “CATCH” system a loan officer digs beneath the surface and really finds out what is the pain point of the client and then focuses on solving that problem
- When the loan officer becomes a problem solver, instead of simply a representative of the interest rate and loan terms, then the interest rate and fees often become a non-issue for most borrowers
- In the “CATCH” system, the “C” stands for Clarify why the borrower has reached out to you
- There is the reason why the borrower thinks he has reached out to you and the real reason the borrower has reached out to you
- It is your job to go beneath the surface and find out the real reason why the borrower has reached out to you
The “A” means to “assign an agenda” to the borrower and get their permission to proceed.
Communicating With Your Loan Officer
Ideally, the loan officer would small talk with the borrower and perhaps ask a few cursory questions to establish a rapport.
- After this, the loan officer wants to get to the nitty-gritty and find out the real reason that is often beneath the surface as to why the borrower reaches out
- To establish this, the loan officer would say to the borrower, “I’m going to ask you some questions and all I ask is that you answer them honestly and to the best of your ability, is this fair?”
- The borrower almost always grants permission for the loan officer to continue
- Thus, an agenda has been assigned (the questions) and the borrower has given the loan officer permission to work through his agenda
- The “T” in “CATCH” stands for “talking the borrower through the pain”
- The loan officer does this by asking question after question, and getting the borrower to expound on his yes/no answers as much as possible without being annoying
- This helps the loan officer to really drill down on the pain point of the borrower
- When the pain point is most clear to the loan officer, then it’s on to the next letter of the acronym of CATCH, which is the second “C” in CATCH and stands for “Close”
- When the borrower has revealed his pain point to you, then the loan officer asks the borrower for their business
- Most of the time the borrower is ready to go at this point
- Sometimes, however, they have objections
- For example, a borrower might say I am waiting to get paid on Friday and cannot afford to pay for my appraisal until then
- He might also say I am going to talk to one more lender before making a decision
- The “H” part of “CATCH” is to “help” your client make the decision to go with you
- One method of help is to offer a scholarship, such as paying for their appraisal
For example, you would tell the borrower that if they signed their disclosures and got their documents in by the end of business TODAY, you would pay for their appraisal and you will close them in 30 days. In this case, the loan officer has successfully overcome the objection of the borrower shopping for another lender or waiting to start the process when he gets his paycheck so he can pay for his appraisal.
Case Scenario Example On How To Get Lowest Mortgage Rates Home Loans
Let’s take an example. John Smith calls in to the loan officer stating he is interested in refinancing his mortgage.
- On the surface, John Smith says he is interested in paying off some debt and maybe getting a lower monthly payment
What John isn’t telling the loan officer is the following:
- One week earlier his son, Mike, an outstanding student-athlete, got into a prestigious private high school on a partial scholarship
The tuition is $12,000 per year to the high school:
- Mike’s scholarship covers ½ of that $12,000, leaving $6,0000 that John will be responsible for or his son’s dreams will be dashed
- John has been able to work out a payment plan with the high school at $500 per month. John’s wife, Mary, has been so stressed over this new $500 per month on the family budget that she hasn’t been able to sleep
- The problem is John’s budget is stretched due to a car accident 2 years ago that he got into and is still paying off a medical bill as a result
- John also is paying only the minimum on two credit cards at a high-interest rate
- John is only making minimum payments due to high-interest rates and finance charges of his credit cards
John had a car accident a few years ago, and as a result of the car crash and subsequent medical bills, John has some late payments on his credit card, thus hurting his credit.
Bankruptcy And Housing Events Does Not Impact To Get Lowest Mortgage Rates Home Loans
Also, John had to file bankruptcy 5 years ago that remains on his credit:
- John has also read in the newspaper that home values in his area have remained stagnant
- Due to his credit issues and perceived stagnant home values, John didn’t think refinancing was an option, so he had not entertained it earlier
- A few google searches on “refinancing after a bankruptcy” has brightened his hopes, and well, he is desperate for a solution to his problems
- John is a proud man who has worked hard his entire life and doesn’t like to complain about his problems, much less share them with a stranger
- At the surface, this is a normal American man with a wife, some kids, a job, and a mortgage
- John says he is interested in paying off some credit card debt and maybe lowering his monthly payments, a common reason on the surface to refinance
- Beneath the surface, what is the real reason why John has reached out to you?
- What are John and his wife discussing in private?
- What is their “pillow talk”?
- It is rare indeed that someone reaches out to refinance just to get a lower interest rate and to maybe pay off a few bills
- Someone usually reaches out to refinance because they have a pain point that needs to be addressed
- John has a talented and hard-working child who may not be able to attend his dream high school
- John’s wife is so stressed out about it that John is worried about her health as well as the overall status of his marriage
- Now these are real problems
- Pain is a strong motivator to act
Total Honesty With The Loan Officer To Get Lowest Mortgage Rates Home Loans
So how does a loan officer extract this vital and personal information from a client who isn’t all that keen on sharing his deeper secrets or even shame?
- Simple, by using the CATCH system
- The loan officer must first and foremost take an interest in the client
- Dale Carnegie’s principle of becoming genuinely interested in another so that person becomes interested in you works here\
- Second, ask a lot of questions
- Questions lead to confessions
- Confessions are what the loan officer is after to detect the below the surface problems that need solving
- As the client is answering these question the loan officer should be mining the data by taking copious notes
Last, but not least, the loan officer should listen instead of talking to the client. There is an old adage in sales that rings true, “He who talks the least makes the most”. It behooves a loan officer to ask a question then mute his phone and intently listen to a client, instead of waiting for his turn to talk. It is easier said than done but comes with practice.
By showing genuine concern for John by asking questions and listening, the loan officer is able to extract John’s pain points. After learning John’s pain points, the loan officer would get to work and find a suitable refinance loan program.
Loans Programs That Offers Borrowers Get Lowest Mortgage Rates Home Loans
Many FHA programs allow for loans to be offered to borrowers with credit scores as low as 580, even with bankruptcies and collections, especially with direct lenders with no overlays.
- By setting John up with one of these programs, the loan officer can probably pay off John’s high-interest credit cards and get rid of his medical bill
- This could easily free up the much needed $500 per month John needs to put his kid through the high school of his dreams and help de-stress his wife and marriage
Do you think John will beat up the loan officer over interest rates if the loan officer is solving all of his financial problems? Probably not. As a loan officer, the idea is to position yourself as a problem solver, not just an “order taker”.