Most every consumer knows how to shop for a mortgage in one fashion. Call a lender and ask about their rate and points. They then compare that to 1 to 3 other lenders and choose the lender that’s best. While I have many reasons to not choose a lender just on rate, that’s not the purpose of this dialog. So, for the time being, let’s just pretend that every lender is created equal and will close your loan with no issues. So what’s left? The rate right??? Wrong.
Allow me to differentiate between the best rate and the best price. One thing that really good lenders do is actively manage the loan of their borrowers with attention to the markets and how the subtle moves will affect interest rates. The problem is that many loan officers couldn’t give you an explanation on what moves interest rates, not to mention the lack of creativity to prescribe the best and most cost effective loan. I digress… on to my point.
Knowing when to lock your loan is always better than just getting the lowest rate on a given day. Focusing on rate and points is exactly the same as buying a stock and shopping how much commission you are paying for a particular trade versus the price the stock is when you buy. I know that is a simplistic and absurd analogy, but I can’t tell you how many times people think they saved .25 points just to end up paying more because of a loan officer locking mistake.
Here are just some of the common loan officer locking mistakes:
1. They have no idea the mortgage market trends. They just lock you when you say so with no advice. That right
there should be a red flag. They are supposed to be the professional and more than an order taker.
2. You get locked for a 45 or 60 day lock when you could easily save another .125% to .25% in points for waiting just a few days for a shorter term lock.
3. You don’t get locked for 45 or 60 days when the market is racing higher because the loan officer is trying to get inside the 30 or 45 day quote he/she just gave you!
4. They lock you on a FRIDAY or before a long holiday weekend. I call this “fudge Friday”
5. They miss that the markets just turned and pricing is about to worsen by .5% in points and have to call you back
with an “I’m sorry… rates changed”. Ask around, that happens.
6. You get locked with the wrong loan structure costing you unnecessary points and fees.
It’s been my experience that there never exists a lender with the absolute best rate AND the experience and knowledge of when to buy (lock). Those guys are more expensive, why? Because they know more than just how to quote the lowest rate. At the end of the day, with proper mortgage management, you end up with a better rate, program, and a loan officer that will take care of you for life.
So, in summary… I encourage you to work with a mortgage professional that will offer a competitive rate and is well respected. How do you find one? Read reviews. A really good LO has reviews of their clients posted online. Those loan officers are at a premium, but you will be better off in the end, not to mention not lose your mind during the loan process.