How is borrowing money like buying a cell phone?
I'm going to share a funny personal story with you. I just bought a cell phone the other day. Now, read on because it has a LOT to do with how to get good mortgage terms.
This was a big thing for me because I bought a real bad-ass cell phone. It's the LG CU500, the first HSDPA compatible UMTS handset for the US, and probably the first to be offered by Cingular.
Now I have no idea what I just cut and pasted about my cell phone but I know the thing cooks. The interesting part is I am a long-time cell phone user. I go back to the days when you threatened to leave your carrier and they gave you a free phone. PAYING for the handset was a never an option for me. I've been a ATT Wireless (now Cingular) customer for years so I logged on to the website and started my search. I found 2-3 phones I like,and marched into the Cingular store , prepared to do battle. Guess what? It costs about 50-$100 dollars more to buy the phone in the store than online. And that's perfectly fine with me because it is definitely worth it.
The moral of the story is this: We don't buy products, We buy solutions. Solutions are best provided by people and not a URL.
So how does this relate to the online versus in-person mortgage origination ? It's actually quite simple. You'll never get the rate/terms you think you will get online. In fact, you might even get a better rate/terms. I paid more for my cell phone but I am convinced that the VALUE I received far exceeds the dumb choice I made for myself.
The mortgage industry, even when practiced with complete transparency, is not a simple choice anymore. There are tons of mortgage programs available with various ways to get approved. A seasoned mortgage professional is always going to deliver the better loan solution for you than an online purveyor of products will. So why would you go online to shop for mortgage terms?
Online mortgage shopping gives you a reference point. It gives you an education about what mortgage lenders look for when approving loans. A seasoned mortgage professional loves educated consumers because they take up less of her valuable time. If time equals money (it does) and you can save an originator time, you'll get a fair shake and pricing that is real similar to the "deals" being quoted.
The "shenanigans" we hear so much about often come from unrealistic expectations and a lack of cooperation from borrowers. When a borrower starts playing a cat and mouse game with originators, it results in a declined loan application. We had this experience this past week. The borrower didn't get us his rental payment check copies until 4 days before the closing date on his new home. Why? He was habitually late these past 12 months with his rent although he claimed to have a perfect rental history.. His loan was declined. Can we approve him on another program for a higher rate? Of course but the originator doesn't want to start all over again. The Realtor requested that our originator charge the borrower more money to compensate him for his time. Presented with that option, our originator gladly started the SECOND loan package for the deceitful borrower.
Go to www.bankrate.com and be brutally honest with yourself as you enter the "compare local mortgage rates" function. Enter information that is similar to your financial status, the property type you are financing, and the type of loan product you think you want. Print it out and go to a local mortgage originator's office with the expected documentation. Ask the broker about her compensation, and whether she can offer similar terms. I think you'll find you get good advice, fair terms, and a better understanding of how the mortgage market works.
It worked for me and my new cell phone.
