Errors that borrowers make when they shop for a mortgage

Errors You Can Avoid . . . don't be this guy

Most errors that borrowers make are caused by the nature of the Mortgage Industry itself and if this article talks just one person out of making one of these errors, it was well worth taking the time to write.

You see, borrowers make these same mistakes over and over again and if you think you might be guilty of even one of them, I want you to consider getting better educated about the process.

Here are the biggest errors that borrowers make:

Shopping by asking for the rate
Not asking about experience or supporting evidence of trustworthiness and integrity like this website where they can research the person they will do business with.
Insisting on a single Product, refusing to listen to options
Not asking about the options of paying points.
Locking the rate too far in advance.

Some of these don't seem like errors at all, do they? So, before I get into the reason these are errors, let me tell you why I think people make them.

I got a call the other day from a borrower. He didn't get my name from a friend, he just called the office.

First, this borrower asked me for a quote. "Give me the rate on a 30 year fixed" he said

What's wrong with that? Simple, if you call enough people, you are bound to find someone who will lie to you. The liars always have better rates and costs than those who tell the truth. There is always something they conveniently "forget" to mention. I could tell this was one of those borrowers who would call until they were fooled. Giving him honest pricing just makes the liars look better, and that is not helping him at all. Still, that is the way I do business and told him the truth. I did not get the business.

Second, I believe that experience, trustworthiness, and integrity are the most important qualities a borrower should be looking for. To be honest, there are a number of scumbags in the mortgage business and they have honed their sales pitches and they sound great. Do you really think that will get you a better deal from them than an honest person? I'll even bet he thought he could tell a scumbag on the phone!

Third, he was seeking a quote on the most expensive product our industry offers, a Jumbo 30 year fixed rate mortgage. 99% of people want something less expensive, not the most expensive. Isn't that why you refinance?

Fourth, he didn't want to pay points and he way buying a house he would stay in forever. Most people don't realize this, but paying points can be the only good thing about the loan process. You can actually make a 25% profit on your money if you plan. He didn't realize that and didn't seem to want to listen either.

Fifth, although his deal doesn't close for 3 months, he wanted to lock in today. I'm no prophet, but I'd bet that rates would vary enough so that somewhere along the line, he'd wish that he hadn't locked so soon. This guy had been a stockbroker for 20 years so he did have enough financial acumen to be a little more opportunistic about interest rates than, "Just lock it in today, regardless of what the rates are."

Last, I suggested that he would benefit from the knowledge contained in my website. He responded, "I don't have time to read." I didn't make this up. This really happened. I've met lots of people who made one of these mistakes, but this was the first time I've ever met someone who made them all! This guy was looking for a $500,000 loan too so even being a little bit smarter could have saved him tens of thousands of dollars.

Avoiding these Errors

Now, let's look at a few ways to avoid these errors.

Shopping for a Rate Only
There are really only 3 factors in considering a quote. The rate, the Broker's fees and the Banks fees. Third party costs such as an appraisal, title insurance, recording fees are all set in stone. They will be the same anywhere. Some may cover those costs for you, but they are still the same.

Read my article "Getting an Accurate Mortgage Quote" to get more details how to do this correctly.

Not asking about experience or evidence of trustworthiness
One of the original reasons for writing this website was to give people the chance to learn about how I do business and to understand that I treat every loan as if it was my own. This is your house we're talking about! The person taking care of that financing should be in it for more than the money.

If you want an order taker, there are plenty of them out there. I would never pretend to tell the cleaner how to wash my shirts or the butcher how to cut my steaks and a mortgage is much more important than any of these things. Interview first, find someone you can work with and then get the quote.

Insisting on a single product and not listening to options
This is likely due to some of the bad reviews of many of the mortgage people in this business. Rather than be taken advantage of, people stick to their guns and take the program they have decided upon.

The mortgage program you have chosen may very well be the best one in your situation, but again, if you are calling a professional, use their expertise and knowledge to your advantage to learn more. When you are dealing with someone who is honestly trying to help you, they will be able to explain clearly why they think the different program is better in your situation. Just look at my loan programs page to see how many different ways there are to do a mortgage.

When I deal with my clients, I explain that there are options out there and ask whether they have considered any of them. I would never tell them what to do, but I let them see theri options and then decide.

Not asking about paying points
Especially when rates are low or you are buying a home, points can be a huge advantage and save literally thousands of dollars over the life of a loan in certain situations.

The savings can be so big that you should always ask about the options.

Some good questions to ask are how much is 1/8, 1/4 and 3/8% lower on the rate? AND, can you tell me if that would save me money?

Locking the rate too far in advance
There is nothing wrong with security and in some cases locking the rate 90 days out is a great idea. But it costs money to lock a rate farther out than 30 or 45 days. In this situation, rates had been basically steady for the last 4 months and while there was a risk of rates going higher, there was also a possibility of rates going lower. In fact, the most likely scenario was actually that rates would be the same.

In this case, waiting 6 weeks to lock in for 45 days at no coast versus locking in for 90 days was a money saver.

Summary
The bottom line comes down to dealing with someone you can trust. That, of course is a main point of this entire website. There are more than a few of us out there that really are honest and trustworthy and in this business to do the right thing for you.

DailyInterest.com is brought to you courtesy of Scott Campbell of 30800 Telegraph Rd, Suite 1801 Bingham Farms, MI 48025
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Scott Campbell or reach me by email, phone or fax scott @ dailyinterest.com or scampbell @ prime-loans.com Toll Free: 888-82-PRIME (888-827-7463) Phone: 248-644-5550 ext 1016 Cell: 248-797-2487 Fax: 248-644-5551

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