I am a great fan of Consumer Reports but I must tell you that I was astonished when I read the article about homebuying and mortgages in the latest issue. I'm all for education and normally CR's take is good. This time they are way off the mark.
The first mistake is ignoring that professional advice has significant value. Phoning people who make minimum wage and asking about rates isn't going to get you smart advice. You can learn more in five minutes talking with a smart person than hours of talking with amateurs. Having done 4,500 loans in my career, I can assure you that the overwhelming majority of people make incorrect assumptions that can be corrected if they were to deal with someone who is experienced, knowledgeable, and trustworthy. It's easy to save someone $5,000 or $10,000. If you don't believe that is possible, read my book and see how to do it.
Second, I think that it is terrible advice to call lenders to get rates, find the best deal, and then call the others back to see if they can beat it. That is unethical and, let's be honest, those "representatives" have zero power to change rates. What they CAN do is lie. They will say, "Oh, I can beat that. Our rate is now…." But it isn't.
The subprime crisis got as bad as it did because millions of borrowers were simply incredibly ignorant about the process. We can see where collective ignorance got us. Trillions of dollars of losses, millions of foreclosures, and lots of pain.
Better advice is urge people to get an education. Buy and read a book and then search for the smartest person you can find to guide you through the process. You are not going to find that person at an 800 number. When you find that person, take his advice, but get your loan there. Don't pick his brain and then go get your loan somewhere else. I don't like to lecture but I consider that to be a shameful practice.
Randy Johnson Randy is a Credit.com contributor and seasoned mortgage expert. He writes about home buying, mortgage laws and real estate finance issues. He has financed over $1 billion in properties, is the author of How to Save Thousands of Dollars on your Home Mortgage and he is a feature columnist for Savvy Borrower.
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I think this is a great article, more realtor’s and buyers should read it. Sometimes beating down banks and mortgage companies does not necessarily mean good relationships and savings. There might be a time where that banker or loan officer will remember the nickel and diming during time of need.
The arrogance I hear in the tone of this post bothers me much more than sub prime mess. You claim it’s bad advice to call a lender asking for their rates. What exactly do you do other than plugging your book? Asking for rates isn’t taking advice from someone over the phone, it’s just a rate. Many people are smart enough to learn this information themselves and how to do a lot without belittling from individuals such as yourself. In the few minutes it took me to read this post I would never work with you.
The first problem is simply this: the overwhelming majority of borrowers do not know what they are doing and they can benefit from help. They don’t get it calling for rates. They should be shopping for help.
The second reason is our industry has properly been severly criticized for all manner of unethical behavior. Yet people call around thinking that will be told the truth.
Many “representatives” still routinely lie about rates. The information gathered will lead borrowers into making a poor choice of lender. The guy with the lowest rate may just be the biggest liar.
Don’t believe that? Go to five lenders’ websites and copy down the rates that are posted. Then call their 800 numbers and see what you are quoted. Some will tell the truth but I did that same survey twice last week with BIG lenders last week and I was quoted rates that were .25% under the posted rate. They lied to me.
BTW, I make about $1.05 royalty on each book, so that is NOT my motivation for talking about it. Buying my book is not important. Buying SOMEONE’S book is.
That’s alright about not working with me. I don’t think we could develop a good working relationship.