Mortgage shopping strategies

05.08.09
By Randy Johnson

I have completed close to 5,000 loans in my career, and in doing so I have observed more than a little about human behavior while people shop for mortgages. To me the most important issue is trust, although many people don’t consider this factor. They wander along looking for even better deals and often end up choosing unscrupulous lenders who are not forthcoming with certain key details. Such people think they’re getting an even better deal, and they end up paying for their mistake.

The first problem is that they do not acknowledge the single most important factor in getting a mortgage: Many borrowers are clueless and can really benefit from the help of an expert. Some borrowers assume that they know everything about the process and it’s just a question of shopping for a price. Not true. Experts who have been in the business are here is to keep borrowers from making mistakes. After decades in this business, you would think that experts such as myself would know at least a few details that first-time borrowers don’t know.

The second problem is that this is "shopping for the future." It's not an instantaneous transaction like picking up a small-ticket item at the grocery store. With mortgage shopping you gather information about something that is going to happen in the future.  You talk with one guy, and then you talk with another guy. You get good faith estimates and compare them. Most importantly, you think each person is giving you accurate, reliable information. Maybe they are, but maybe they’re not.  

Borrowers simply have no accurate way of knowing whom they should believe. They might be talking a very knowledgeable, trustworthy person, or they may be talking to some guy making $10 per hour answering phones at an 800 number controlled by a huge lender.

Caught in this quandary of, "Whom should I believe?", many people invariably end up believing that the person giving them the lowest numbers is also the most reliable. However, in reality they may have found the biggest liar or the most incompetent person.

If you get different information from each source, how can you tell the difference between reliable information and unreliable information? You can’t. In an environment in which you cannot get accurate information, how can you make intelligent decisions?  You can’t, which is why many people make expensive mistakes.

So how do you avoid this quandary? The answer is to get some general information about the market from the Internet. There are thousands of websites that will do this, such as bankrate.com, hsh.com, and many lenders. In fifteen minutes you can get this information.

Armed with this information, get a referral to a trustworthy source by talking with your friends. Someone will have dealt with a hero. If your friends can’t make a recommendation, the Upfront Mortgage Brokers Association is a good place to go. And I am on the Board of the UMBA, I know first-hand that the members will work for you, not the lender, and are willing to commit to compensation right up front. You can be assured that you will get a good deal and that there won’t be any funny business with rates or pricing late in the transaction. Once you find a trustworthy lender, trust your source and don’t keep shopping.

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Avoid expensive mistakes when shopping for a mortgage.