home buyers, purchase mortgage, mortgage shopping, posted prices, multi-lender sites, complete prices, fully adjustede prices, timely prices

July 8, 2015 

Home buyers who need a purchase mortgage are less likely to use the internet to find one than are existing owners looking to refinance, yet the benefits of on-line shopping are just as large if not larger for home buyers. The problem may be that home buyers expend so much time and energy on finding the right house that they are relieved to find that there is an easy path to a mortgage – which is to shift most of the responsibility to the loan officer recommended by the real estate agent or the builder.  

Finding your own mortgage on-line can result in lower costs and better decisions than taking the easy path, provided that the web site or sites that you shop have the right features. This article describes the site features you should look for.  

Multi-lender sites are a great  time-saver because they allow you to compare the prices of a number of lenders, all formatted in the same way, in a single operation. The major features of 14 multi-lender sites are shown in my article How Effectively Can You Shop at Multi-Lender Web Sites?  

The down side of multi-lender sites to some borrowers is that the lenders are mainly small firms and very likely you won’t recognize any of their names. If you want to select among large name firms, you must visit their individual web sites and establish comparability between their different systems, which can be a major hassle that none of them try to make easy. 

Anonymity 

In my view, the best approach is to shop prices anonymously, until such time as you have made a decision to contact a lender, at which point you only want to deal with that lender. Until then, keep your ID to yourself.   

 If you price shop multiple lenders, you must provide them all with all the information about your transaction that affects the mortgage price, but that does not include your name, email address, social security number or street address. If the input form includes such contact information, you will be besieged by multiple loan officers quoting prices that mean nothing – except, perhaps, to identify which one is the biggest liar.  

Complete Prices

The price of a fixed-rate mortgage is the interest rate, lender fees expressed as a percent of the loan, called “points”, and fees that are a fixed dollar amount. The site should display all three components, and on ARMs it should also show the margin, index and rate caps. If the prices shown are not complete, cross the site off your list. 

Fully Adjusted Prices

You want the prices you shop to be adjusted for all the features of your transaction that affects the price. These are: zip code of property, occupancy type, property type, loan purpose, loan amount, down payment (equity), credit score, lock period, and whether you want to waive escrow.  

If the price you receive from the web site is not fully adjusted for all these factors, then you are pricing someone else’s loan, not yours. If there is a relevant feature of your loan that the site does not ask you about, it assumes that the factor is the best possible, which generates the lowest price -- and has the largest potential for an unpleasant surprise. If the site does not ask for your credit score, for example, it most likely will assume that you have a score of 800, which means that if your actual score turns out to be significantly lower, your actual mortgage price will be higher. You won’t find that out, however, until after you have applied and your loan has been processed. 

Timely Prices

You want the prices you see on the screen to be live, not obsolete. Since lenders reset their prices every day, and sometimes during the day, a system providing timely prices must be directly linked to the system that generates prices. If prices on the web must be updated through a separate process by someone who might be at lunch or out sick when the market changes, the web-based prices may become obsolete.