Imagine if you will for a moment, that you wanted to shop for the cheapest gas station to buy gas at. It seems easy enough at first. You can drive around and look at the big billboards and after you get tired of driving, you simply pull into the one that had the best price. That seems reasonable enough.
What if the store owner had the ability to adjust the billboard very easily with just the click of a button and did so multiple times a day? Even MORE tricky right?
What if when you pulled into the station that had the best price you saw as you drove around, and in the time that it took you to drive around, the price you saw at the others had changed?
Virtually impossible to shop simply on price right? Welcome to today’s mortgage market. You say wait a sec. What about those guys on the internet that you go to and they supposedly get you several quotes from lenders? Maybe a good idea, maybe not. 95% of those guys are not lenders at all, but just lead sellers. They take your information and sell it to all bidders. Your phone might be ringing for days and again, you will be getting quotes from different lenders over different time frames and ultimately, you really are not guaranteed the rate until you’ve made application and locked the rate at which time, even more time has passed and rates have changed again.
Sound like a sales pitch? It might, but it is just the facts when you are talking about a volatile market with VERY fluid interest rates. Take a look at the chart above to see a fairly calm day in the mortgage market. It still shows variance of around .125 or 1/8 of a point. That may not seem like much, but in order to buy down an interest rate that same 1/8 on a $200,000 loan, it would cost around $1000 to $1500. In the last year, we have seen the market move over .5% in one day. That means at noon you could have been quoted 4,5% and at 5 the same lender would be quoting 5%!
What is a shopper to do?
I recommend working with someone you can trust that is recommended by friends or family and that you know is a trusted professional. In this market, the timing that the lender used to lock your rate is more important than the rate that was quoted when you were shopping for it. How do you know you are dealing with a professional?
I am glad you asked. Tune back in for our next installment: Four questions to ask your lender to know if they are a True Pro or email me with “Shopping Letter” in the subject line for the free report.