• Tel: 803-707-9997
    Email: info@kwestmortgage.com

  • Did you pay too much for your Mortgage?

    2019-12-19
  • by Rodney T Tumbleston, Jr.  Managing Member, Licensed Mortgage Originator, Forensic Underwriter, Economist, Legal Consultant, and friend to pets and people.   NMLS# 414429

  • The Price You Pay

    It’s amazing that folks that will shop 3 or more stores or go online to save as little as 10 cents a roll on toilet paper, a pizza, or other consumables on average do not shop or at least get a second opinion on the biggest financial product they may ever enter, their Home Mortgage.

    In fact various studies and surveys indicate that between 53% and 75% of homebuyers or homeowners never get a second quote when buying or refinancing.   They simply go with the first source their RE agent suggests, where they have their checking account, an online lender, current servicer, a social media guru they saw, or even a very expensive ‘rocket’. It’s just easier right?

  • “Why are consumers leaving money on the table? Answering that question just won Richard Thaler the most recent Nobel Prize in economics. His research into seemingly irrational economic behaviors finds that in general consumers search too little, get confused while evaluating complex alternatives, and are slow to switch from past choices, even if it costs them. These types of behavior apply to more complex tasks such as taking out a mortgage, and can lead to borrowers relying solely on their existing banking relationship or a single referral from a real estate agent or a friend.”  

  • Tip

    Myth : Call around for the best Rate:

    We in mortgage lending and banking have for many decades trained consumers to look for the ‘best rate’.   That is all quite by design as if we keep you focused on the Rate and not on costs you make for an easy target for us to make extra profits.  In fact many in our industry play somewhat of a shell game with rates and fees so much so that consumers get confused and just give up and take whatever they are offered.  All by design.  

    A secret from a 30+ year mortgage and housing professional:

    Do not focus on a rate, but select a market rate, program, and down payment as a constant and then compare lender fees for the same exact loan.

    You can always elect for a lower rate, but setting constants is the only way to determine the lending source with lowest margin/costs.  

     

  • Time to Shop

    Ok so you have decided ‘Hey I can do this and I’m going to find my best deal on a mortgage or at least not allow myself to be fleeced by an expensive lender.  You’ve done your research, know what type of loan you may want, and are ready to set pen to paper and call some lenders. Be brave as you inevitably are about to jump in the water with some sharks.

    Another tip from a seasoned mortgage pro; Remember your point of contact, loan officer, or more specifically a Mortgage Loan Originator, is a sales person for the lending outlet you are considering. If you contact a seasoned sharp one their first job is to build rapport with you as a potential client.   Nothing wrong with that, but that said don’t be surprised if you are on the phone with them for 30 minutes or more before there is any discussion about rates and fees.   Don’t be offended as it’s their job and good ones are fully prepared to answer any objections with logical feedback as to why you should do your mortgage with them even if they are more expensive than others.

    How to start the conversation and the expected outcome: Most call center mortgage agents use highly researched and professional scripts designed to earn your business and trust.   If they can do it, why not you?   Here are two script examples and the message you may be sending to the sales person and may not even know it.

    Option One:

    Consumer – ‘Hi this is Betty Buyer I’m buying a new home and would like to know your RATE?'

    Lender’s thought – Bingo I’ve got a live one that will get me that trip to Hawaii for hitting my goals. Let me pull the lowest rate I can quote and reel this one in after I build a little rapport and trust with Betty.

    Option Two:

    Consumer – ‘Hi this is Betty Buyer I’m buying a new home and would like to get some information on your lender fees. I’m specifically looking for a 30yr fixed rate mortgage, I’m putting 20% down, my housing weighted credit score is 720, the home is a single family detached residence, and I’m buying it as my primary residence. Can you send me your points and lender fees at a rate of say 3.875%?

    Lender’s thought – Dang Betty has done some research and with our highest in town fees she sure isn’t going to help me make it to Hawaii once she sees them.  I’ll have to pull out my A game to see if I can reel this one in, but it may be tough.

    All this said for most consumers doing this on their own usually the most lenders that can reasonably be shopped on any given day is about 3 to 5. Why, well while you are on the phone chatting with these folks, learning about their new baby, trip to Hawaii, and all the other stuff you really didn’t call for the markets are moving. Rates/fees change with the markets and the lender that may have been the winner when you called at 9:00 in the morning has re-priced at noon. Now you have to start over. Did I mention our industry makes this tough for a reason?

    Confused consumers = more lender profits.

     

     


  • For fun, I just polled our wholesale outlets, 19, and for the same exact financing product, a 30 yr fixed rate mortgage The lender fees for the same are over $4200 more from the lowest to the highest.  These are all wholesale btw.  High cost Retail, one channel lenders, are likely higher, but these are just on our wholesale side comparisons.  Like that?  95% more in fees for the same service and loan?  Not me for me :-)