Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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How to Shop for a Home Loan in 2016

When it comes to purchasing a home, 47% of borrowers don’t shop for a home loan.  Instead, nearly half of all mortgage borrowers miss huge money-saving opportunities to shop and compare home loan options.  But, a little knowledge can go a long way – especially for buyers with hurried timelines!

Buyers Who Know More, Shop More

Buyers who know more about the home financing process are more likely to shop for a home loan – and save money! But, how does one shop for a home loan?  Aren’t all buyers “shopping” when they call around or browse the web for the lowest interest rate?  Plus, what else is there to compare in addition to interest rates?

To start, buyers should begin shopping for a home loan before they are in hurried state. The tornado-like tempo that is known as the “home purchasing process” is swift and unforgiving to those who are unprepared.  So, shopping for a home loan prior to shopping for property allows buyers:

  • …the opportunity to review the myriad of fees and charges that can be added to a specific loan.
  • …time to compare multiple loan programs with other trusted financial advisors like attorneys, financial advisors and close family members. This is yet another money-saving tactic as buyers compare down payment options and mortgage insurance costs to their overall financial picture.
  • …an escape from hurried situations. Shopping for home loans last minute is not the most comprehensive or cost-effective strategy. Plus, any hurried attempts to compare lenders once in contract is often discouraged as the process could “delay” the home purchasing process. That said, showing up to a transaction entirely prepared increases a buyer’s odds of closing on time. Otherwise, buyers who are less prepared could face delays in closing which could add to unexpected costs like per diem charges and lock extension fees.
Buyers who shop for a home loan before they shop for an interest rate are engaging a money-saving opportunity that's larger and more meaningful than they may first assume.

Buyers who shop for a home loan before they shop for an interest rate are engaging a money-saving opportunity that’s larger and more meaningful than they may first assume.

Focus on the Tips – Not the Interest Rates 

Interest rates are very important but, they aren’t the only thing a buyer should be shopping for because interest rates are volatile and can adjust multiple times a day. Buyers who focus on interest rates alone will likely drive themselves crazy trying to find the “best” deal – even when it doesn’t exist.  That said, hold off on shopping interest rates and concentrate on shopping first for the “best” home loan option because:

  • The lowest advertised interest rate does not always include the lowest lender fees and/or loan charges. Though certain lenders may advertise very attractive rates, the fine print will reveal that additional fees and charges must be included in the borrower’s loan.
  • All lenders are not created equal.  Despite Dodd-Frank and the heavily-regulated environment all lenders must operate with, the variances between lenders and their institutions are more pronounced than most buyers may assume – Particularly, because the cost of compliance has risen. In effect, some lending institutions now pass these compliance costs on to their customers or their stakeholders.  For others, the cost of compliance has forced an exit or departure from their previous offerings meaning that they can no longer afford to offer as many loan programs. In other words, buyers could be paying more for a loan they could get elsewhere OR offered a mortgage program that’s just not a fit because that lender isn’t able to offer a better mortgage option.
  • The appraisal process is very important and often overlooked. Read this previous post regarding the difference between AMC Appraisers and Panel Appraisers. This is still a hot topic issue that can negatively impact the home purchasing process. Choosing a lender who employs a limited-liability appraisal process can save buyers money and heartache. 

Bottom Line:

Timing should be every home buyer’s first priority.  As I’ve mentioned many times before, a comprehensive review of one’s mortgage profile is imperative.  Completing this before one purchases a home allows the home buyer to shop for a home most efficiently, write offers that are worth their weight in gold and increase the likelihood of an on-time closing.  More importantly, this allows a buyer to compare notes with other financial representatives within their circle.  Whether it’s an attorney, financial advisor or another lender, taking time to confirm that the implications of a mortgage will not negatively impact one’s long-term financial goal(s) is a necessary step in safeguarding one’s overall wealth (or plan to build wealth).  It’s also an opportunity to interview lenders, discuss pricing options, lender fees and procedural details.

Trust me, this will making shopping for the “best” interest rate much easier when the time is right! 

Please contact me if you are reviewing your home financing options. Working with a lender that understands the magnitude of a buyer’s decision-making process is certainly one that is willing to provide this service beyond expectation.   Let’s get started!

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