Avoid Pitfalls

Credit Reports - Watch who you let pull them

• You want to keep credit pulls to a minimum. Inquiries lower your scores. 
• Mortgage Broker Advantage: We use one credit report pull to shop around at multiple lenders. 
• All credit inquiries within 90 days of pull need to be explained in writing
• A full Tri-Merge Credit Report is required to do a Pre-Approval
  • 'Soft Pulls' or 'Single Bureaus' don't give the lender scores that stick. If your scores move around, so does your Pre-Approval. Not Good.
• Tri-Merge Credit Reports with re-issue for underwriting can run upwards of $120+ these days. Even if you are not paying upfront for them they are expensive.
• Credit Reports are valid for 90-120 days. The loan has to close by the expiration Date, otherwise the credit has to be re-pulled and will generate new scores.
• If you got Pre-Approved at multiple lenders (don't do this), the score might have been the same at the start, but 90 days later when the final lender re-pulls the credit and scores, there will be multiple recent inquiries lowering your score further than if you'd just got Pre-Approved at one lender.
• A lower credit score may result in a higher rate or costs.
  • Credit scores determine loan pricing of rates in 20 point increments on conventional loans. 780 gets better than 760, 760 better than 740, etc.

Even after Underwriting Approval, don't make changes to your financial position. It ain't over until its closed.

• Underwriting will pull a 'Soft Pull' credit report just before close, just to see if you have any new credit inquiries and new debt.
• Underwriting will do a final verbal verification of employment just before close.

Employment

• Stability of income is critical
• Don't change your employer while getting Pre-Approved or Buying a Home
• Don't switch how you get paid. For example going from 100% salary to 100% commission, can negatively impact your qualifications.
• Don't give notice at your current employer.

Purchases on New Credit

• Don't buy a vehicle or other large purchase on credit
• Don't let anyone run your credit after Pre-Approval until you close.
• No '90 Day same as cash' purchases of appliances or furniture
  • The company always runs credit even when they say they won't

Paperwork

• It is nearly impossible to get all the needed personal documentation upfront at Pre-Approval. There will be additional needs throughout the process.
• Try to plan on being around while going through a mortgage process. This is not a good time to go on vacation, and certainly not go overseas.

Best Rate ?

Finding the "Best Rate" is like looking for the elusive unicorn under the rainbow. Every time you think you have it pinned down . . . . it moves.

 

No one wants to pay a higher rate than they have to. Everyone wants a good deal on their rate. The problem comes up when a buyer fixates on 'Lowest' or "Best' rate to the near exclusion of any other decision point.

 

It is actually illegal by Federal and most state's laws, and considered a 'deceptive practice', for a Lender or Loan Office to use the terms 'Lowest' or "Best' rate. 

 

Then there are the hidden problems.

Common "I'll beat any other offer" scams

1) Pricing Exceptions. This is an industry term for when a Lender reduces their rate or costs some, to compete with another lender's offer. This should never happen - everyone should get a good deal from the start. With the same scenario and qualifications, your sister should get the same deal as any stranger. There is a Federal Law from the 1980's called "Equal Credit Opportunity Act' (ECOA), that basically wants everyone with the same criteria, to get the same deal. Many times pricing exceptions are discriminatory. Many times an offer of a pricing exception is just a 'bait and switch' ploy and they just give you their regular rate when its time to lock. Search "mortgage company pricing exceptions" on Google and see those fined millions in 2023 for this at best unethical practice.

2) Brokers that sign up one lender at a very reduced compensation percentage, much lower than all their other lenders, just to offer a lower rate with the required audit paperwork if caught. First, if they do this they are probably steering borrowers to lenders varying their compensation. Second, it is very unlikely when it comes time to lock in your loan, that the broker will use the lower comp lender on your file. Most likely they just used it to 'bait and switch' you to them.

 

Even if the lower rate is real (usually isn't), if a lender is willing to try one of these unethical and potentially illegal practices to steal you away from other lenders, what will they do to you during the process to benefit themselves?

 

As a professional, it is difficult to find the rate scenario that works. When I compare rates between my wholesale lenders, many times I find I would use lender A at no points, and lender B at paying points. So then the decision complicates itself to whether or not my buyer should/wants to pay points or not, in order to know which lender to use. Sometimes I only have one lender source that I think will approve the loan, and we have to go with that lender to get the loan closed. After all, lower rate quote is worthless if the loan doesn't close. A quick story. I shop for many products at Costco. I know I will get a good price there. Not the “best” price necessarily, but a very good price and a high quality product. With enough looking you can find most items sold at Costco cheaper somewhere else. But not with Costco's backing nor ease of purchase. I know I got a good deal without being cheated. Similarly, I never say I have the “best rate”. I have very competitive rates, and usually beat the local banks/credit unions and national mortgage banks local offices and online. But I am not the absolute cheapest. Spend enough time searching and calling, you may beat my rates. If you choose this other lender, you won't benefit from my help and advice which is invaluable many times. Knowing I shop multiple lenders, and benefiting from my experience when the loan is in process, is why buyers choose me.

Bringing it all Together

This website is how I recommend buyers to shop around for a mortgage. It is based on decades of experience, and current changes in how mortgages are done today. When I speak with a close relative out of state, this is what I tell them to do to find a Mortgage Lender and Loan Officer to help them. You get to decide on how you will shop for a mortgage loan. Others may tell you how they think you should shop.

 

You are buying a home, not Raisin Bran. A Home Loan is a service, not a commodity. The Loan Officer your choosing is providing a service to you. Choose the best service for you, just like choosing any other service you need.