Shopping For Mortgage And Best Rates For Home Buyers
This article is about Shopping For Mortgage And Best Rates For Home Buyers
Many home buyers and refinance mortgage loan borrowers needing a mortgage may go shopping for mortgage rates, especially refinance mortgage borrowers.
- I often get many phone calls from consumers if shopping for mortgage lower credit scores
- Many mortgage loan applicants are told by mortgage brokers not to go shopping for a mortgage
- This because it will lower their credit scores every time a lender pulls their credit
- Many mortgage shoppers get frightened over these comments from mortgage brokers and stop shopping for mortgage
- They often go with the mortgage broker that told them that shopping for mortgage rates lower credit scores
Shopping For The Best Rates And Terms
Borrowers should be able to shop for the best mortgage rates and terms:
- However, consumers should not have every lender to pull their credit
- Should first interview loan officer and see whether or not they can do mortgage loan
- Borrowers with extenuating circumstances or credit issues, find out whether lender has any mortgage lender overlays with the type of issues at hand
- Many lenders have mortgage lender overlays on credit scores, credit tradelines, verification of rent, collection accounts, and debt to income ratios
- Borrowers will run into loan officers who will tell them shopping for mortgage rates will lower credit scores
- Others tell borrowers that shopping for mortgage is a waste of time and they will just be lucky just to get a home loan
- Buyers and refinance borrowers with lower credit scores should still shop for mortgage and rates
Even if credit scores are low and the chances are that mortgage rates will be high due to low credit scores, borrowers need to feel comfortable not just with the lender but loan officer as well.
Shopping For Mortgage Is Recommended
Borrowers should shop for mortgages.
- Not just because to get the best mortgage rates but also to get a loan originator who they feel comfortable working with
- The mortgage application and approval process can be an extremely stressful process
- Getting along with loan originator is one of the most important factors
- Every loan officer has different ways of doing business
One of the biggest complaints against loan originators is that they do not pick up their phones or return phone calls or emails in a timely manner.
Call Different Lenders To Compare And Contrast
Some loan officers return phone calls and/or emails within 30 minutes of receiving messages from their borrowers and are available late evenings, holidays, and weekends no matter how busy they are:
- Feel free to talk to as many loan officers and pick their brains
- What common things together does borrowers and loan officers have
- Test out the loan officer’s knowledge
- Do not have the loan officer pull credit until borrowers are sure they feel comfortable with the loan officer and the company
- Once borrowers feel comfortable the loan officer may be the potential loan officer borrower may hire, then give the green light to run credit
The loan officer needs to run credit in order to qualify and pre-approve borrowers.
Do All Lenders Have Similar Mortgage Rates?
There is no such thing as a free lunch in the mortgage industry.
- Mortgage Rates will vary from lender to lender
- In general, all lenders base their mortgage rates pricing on borrowers credit scores on government loans
- Conforming Loans pricing on rates depends on credit scores and loan to value
- There can be a difference between more than 1.0% percentage point from one lender to another lender
- Some lenders cannot give lender credit towards borrowers closing costs due to them having high rates
Other lenders can offer lender credit in lieu of higher rates to borrowers to cover part or all of their closing costs.
Loan Level Pricing Adjustments
Loan Level Pricing Adjustments (LLPA) are pricing adjustments lenders use to penalize borrowers with less than par pricing.
Here are examples of LLPA hits on borrowers:
- Lower credit scores
- Manual underwriting
- Higher debt to income ratios
- Higher loan to value on conforming loans
How Will Shopping For Mortgage Lower Credit Scores?
Every time there is a hard credit pull, there will be an inquiry reported on the consumer credit report. Yes, a hard credit inquiry will drop consumer credit scores by two or more points. When consumers first shop for a mortgage loan, the first lender that pulls credit scores will drop credit scores. However, as more and more lenders pull credit within a 60 day period, credit scores should not be impacted. Maybe the first five mortgage credit pulls may drop consumer credit scores. But after then, consumer credit scores should not drop as long as it has been pulled in a 60-day window. Credit inquiries look very bad on a consumer’s credit report, however, if a mortgage lender sees that you had 12 credit inquiries in a period of 60 days from mortgage companies, they will understand that consumers were shopping for a mortgage.