When most people shop for a home loan, they lead with “please send me your rates” rather than interviewing the mortgage broker or loan officer to see what they’re going to do to work for them. What they don’t understand is the mortgage interest rate quoted during the pre-approval process before you have a signed purchase contract doesn’t matter.
Why Interest Rate Quoted During Pre-Approval Doesn’t Matter
In order to actually secure (lock) your mortgage interest rate, you must have a signed and executed purchase contract for the house you’re planning to buy. Reputable mortgage brokers and loan officers quote a higher than market rate during the pre-approval process because they understand markets fluctuate, sometimes several times per day. They want you to understand a worst case scenario of what your payments might be. In my experience, these loan officers who quote slightly higher interest rates during pre-approval are the same ones who will shop the hardest to get you the lowest rate when you’re in contract.
Shouldn’t I Go with the Person Who Quotes Me the Lowest Rate?
Mortgage broker and loan officers looking for an edge, quote a lower than market interest rate during the pre-approval process to get business from uninformed buyers. They know it will take time to find a house and when you do, they’ll hit you with a market (or higher than market) interest rate and say “sorry, the market’s changed since you’re pre-approval”. At that point, when you’ve written off all other mortgage brokers who you thought had “higher rates,” you’re stuck because you’re in contract and don’t have time to shop for another loan. In my experience, the types of loan officers willing to quote below market rates will not work very hard to secure the lowest rate for you when the time comes because they don’t have to. They know they have you over a barrel.
What’s the Best Way to Shop for a Mortgage Broker?
Interview them. Sit down face to face and ask them what types of loan programs they have to offer. Explain your situation, what type of home you’re looking for, the price you want to spend and ask them what they recommend for you. Ask them to explain the interest rates and what they’re going to do once you’re in contract to make sure you’ll get the best rate. Ask them which banks they work with and which ones have the best programs. Do this with a few mortgage brokers. After you’re done, select the mortgage broker or loan officer who you think will do the best job for you.
Need a Recommendation for a Top Austin Mortgage Broker?
Call us at (512) 827-8323 or email us at info@11OaksRealty.com! We work with some top quality mortgage brokers who will shop for the best rate for you. They’ll sit down and explain the mortgage process and help you select the best loan program.