Canvassing Lenders
It is difficult, if not impossible, to find the “best deal” in town. Many lenders change their posted rates daily. No lender has the best rates all the time, and a lender with the lowest rates in one type of mortgage may have high rates in another type. Despite the difficulties involved with shopping for a loan, there is no better way for you to save money than telephoning lenders and comparing rates (see Figure 5.5). The Internet now has many sites with current mortgage interest rates, both nationally and locally. (See the section in Chapter 6 called “Mortgage Lending on the Internet” for additional advice, and see Appendix L for some Internet sites to visit.)
Whom to Call
Some large metropolitan areas may have as many as 150 mortgage lenders; smaller markets, as few as a dozen. In most areas, calling every lender in the telephone book would be impractical, but calling 15 to 20 lenders should result in significant savings.
FIGURE 5.6 Who Makes Mortgage Loans?
If only a dozen lenders are in your area, call them all. If there are 150, how do you choose the 15 or 20 to canvass?
In some metropolitan areas, there are Mortgage Rate Reporting Services that poll lenders for their rates and publish a weekly report, some Boards of Realtors® maintain a list of mortgage rates on their Multiple Listing Service computers, and many newspapers publish a list of mortgage rates in their real estate section. Ask your agent or check with the local newspaper to find out if there is a rate reporting service in your area. You can also select a mortgage broker, explained later in this chapter.
Because interest rates change frequently, the weekly listings often are out-of-date by the time they are published. However, some lenders' rates are consistently lower than average, and other lenders' rates are consistently higher. The value of the rate reporting services is to help you select the 20 lenders to canvass.
If there is no rate reporting service in your area, you have to rely on your real estate agent, your attorney, your friends, and the Yellow Pages. Mortgage companies make more than half of the nation's mortgage loans. Commercial banks now make more than 25 percent, and savings-and-loan associations less than 20 percent (see Figure 5.6). This is an almost complete reversal from the situation of only a few years ago, when more than half of all mortgage loans were originated by savings-and-loan associations and commercial banks were only bit players.
FIGURE 5.7 Fixed-Rate Loan Shopping List
If you are refinancing or have a mortgage on a home that you are selling, call your current mortgage lender first. Some lenders give special deals to existing borrowers. Second, call the banks where you have checking and savings accounts. They may not be active in the mortgage market, but if not, they can be another source of advice on which lenders are the most competitive.
Mortgage companies make 85 percent of the FHA- and VA-insured loans. If you are shopping for an FHA or VA loan, limit your search to mortgage companies. If you are shopping for a conventional loan, call several savings-and-loan associations, several mortgage companies, and a few banks. If you are self-employed or own a business, your commercial bank may give you a subsidized mortgage rate as an incentive to keep your commercial accounts.
