Borrowers who want to make their deal directly with a loan officer or mortgage broker (henceforth “LO”) can use this site to reduce or eliminate the information advantage the LO otherwise has. Where the site can’t help you, this guide will advise on how you can help yourself.
The Selection Process
The professor can’t select an LO for you, you are on your own, but here is his best judgment about how to, and how not to do it.
Obtain a Referral From a Trusted Source: While far from fool-proof, this is the only sensible way to select an LO. Just bear in mind that most positive referrals from borrowers are based on a single episode which is not always correctly interpreted. Positive referrals from Realtors are usually based on multiple episodes, but Realtors primarily assess LOs on their reliability for getting deals done on time, not for pricing or the quality of the advice they give borrowers. While a referral is the best way to go, it is no guarantee against being steered to the wrong product or overcharged.
Don’t Let the LO Select You: Having the LO select you is the worst possible way to go, since these are LOs who can’t get referrals. They purchase leads to prospective borrowers and rely on their sales skills and charm to sign them up.
Don’t Select an LO by Soliciting Price Quotes: Some borrowers think the way to select an LO is to find a price on-line and ask prospective LOs if they can beat it. This is a useless exercise because LOs can’t be held to price quotes; almost all LOs will respond with some version of “No problem, I can beat that,” whether they can or not. If the price you quote is ridiculously low, the honest LOs will pass, leaving you to select among the others.
The most difficult challenge facing a borrower shopping off-line is that the borrower has to commit to an LO before the LO commits to the borrower. The borrower commits by applying for the mortgage and providing the information the LO requires to process the application. The LO commits by locking the price, but this usually requires that the application has been approved and critical information, including credit score and property value, have been verified. This lag between the borrower’s commitment and the LO’s commitment provides the LO with ample opportunities to overcharge you.
Broadly, there are two ways to prevent overcharges. One way is to withhold full commitment by proceeding covertly with two or more LOs, then playing one off against the other when both have cleared you to lock. The downside of this, in addition to it being sneaky and time-consuming, is that you probably will have to pay for multiple appraisals, and the LOs will feel deceived and angry. Some will walk away rather than be manipulated, leaving you with only one (angry) LO, or perhaps none. I do not recommend this approach.
The much better alternative is to price your loan on this site, from your initial contact until the price is locked. updating it as needed, while keeping the LO informed as to what you are doing. Documenting a competitive price as a standard keeps the LO honest without any deception.
Using This Site to Keep the LO Honest
If you want to use this site as a stepping stone to finding your own LO off-line, you follow the same procedures as shoppers who intend to select a Certified Network Lender (CNL). This means starting at Steps 1, 2 3 or 4, depending on your needs. However, when you get to Step 5, instead of selecting the CNL quoting the best price and providing contact information, you exercise your option to branch off and remain anonymous.
Dealing With Offline Risk
Following the steps described above, you are positioned as well as possible to negotiate a favorable deal with your LO. But there also is a risk, if you don’t watch your step, that you will end up with a worse deal.
The risk arises with LOs who can’t beat the price you bring to them, which is highly competitive, but prefer to resort to one or more stratagems to retain your business rather than withdraw gracefully. Salesmanship is part of an LO’s stock in trade.
On a purchase transaction, the LO can agree to beat your price but stretch out the paperwork past your point of no return, where your closing date is too close to begin again with another lender. You will then end up with a higher price. The best way to deal with this danger is to develop an agreed-upon time line with the LO that will leave you with enough time to begin again elsewhere if the LO doesn’t deliver.
On a refinance, they may attempt to cast doubt on the validity of your “internet price”, which has not been locked, and offer to put your mind at rest by locking you immediately at a higher price. It would be a mistake to underestimate their powers of persuasion.
Particularly unscrupulous LOs may offer to lock you at a lower price, but don’t. If the market price drops, they lock then and collect their commission. If the market price doesn’t decline, they find something wrong with your application to squelch the deal. This won’t work if you demand to see the lock confirmation statement.
Needless to say, none of these risks arise if you select a Certified Network Lender on this site.