“I have read statements by you regarding ‘live mortgage
pricing’, but I am not sure what it means, or why it is
important?”
A live mortgage price quote is a price that the lender is
prepared to lock at
the time of the quote. A lock is a binding commitment to
make a loan at the prices and terms specified in the lock
agreement. A live price quote is believable. A price
that is not live, for any of the reasons given below, is not
believable. Yet many borrowers shopping for a mortgage
select lenders on the basis of price quotes that are not
live.
Lapsed Mortgage Prices
One reason a price quoted to you is not
live is that it has lapsed. It was live, but no longer.
Mortgage prices are set by loan originators on the basis of
secondary market prices. Most loans are sold into that
market after origination. The practice is to price loans in
the morning of each business day, after the secondary market
has opened and trading prices have emerged.. Those prices
will hold for the remainder of the day, unless there is a
significant change in the secondary market, in which case
the opening prices will be replaced by new prices.
Price quotes after the close of business are the prices that
existed at the closing. Comparing the prices of different
lenders over a week-end, when web sites show Friday’s
closing prices, is convenient and can make your shopping
more efficient. But before making a selection decision, wait
for the closing prices to be replaced by live prices
on the morning of the next business day.
To avoid problems with lapsed prices, shop web sites that
provide a time stamp with all price quotes. The stamp should
note the date and time of the quote, whether the quote shown
is live, and if it is not, when it lapsed and when new live
quotes will become available. An illustration of what you
should look for is at
mortgage price calculator time stamp.
Unadjusted Mortgage Prices
A second possible reason a mortgage price quoted to you is
not live is that it is not properly adjusted for all the
features of your transaction. Just as shoe prices vary with
the features of shoes, mortgage prices vary with the
features of loan transactions. There are 10: loan purpose,
property value, down payment, loan amount, property zip
code, credit score, type of property, type of occupancy,
lock period, and escrow waiver. If the features assumed by
the lender in quoting your price do not conform to your
transaction, it may be a live quote for someone else’s
transaction, but not for yours.
Lenders who quote prices over the telephone usually assume
the transaction features that command the lowest price.
Given the limitations of telephones, this is understandable,
perhaps even defensible. What is indefensible is the same
practice on lender web sites, where it is all too common. I
will be writing an article about this shortly.
Needless to say, it is not the practice of any of
the lenders who provide price data to my site.
To avoid problems with unadjusted prices, solicit quotes
only from sites that ask you to first input information
about the 10 transaction features listed above that affect
the price.
A third possible reason a mortgage price quoted to you
is not live is that
only part of the price is disclosed.
The price of a fixed-rate mortgage is the interest rate,
lender fees expressed as a percent of the loan amount
(“point s”), and lenders fees of fixed dollar amount. The
price of an adjustable rate mortgage includes those, and in
addition it includes the margin that is used to reset the
rate on a rate adjustment date, rate adjustment caps, and
maximum and minimum rates.
Some lenders, but none of those that provide price data to
my site, have a bad habit of leaving out one or more
components of the price.
To avoid partial prices, make sure the price includes all
lender fees, not just points, and on ARMs look for the
provisions cited above that affect future rate adjustments.
The fourth possible reason a mortgage price quoted to you is
not live is that it is fraudulent. The lender has no
intention of lending to you at the quoted price, he is a
“low-baller” who quotes a price below the market in order to
get you started on the loan process. Since prices will be
reset many times while the loan is being processed, the low-baller
always has a plausible reason for not being able to deliver
the quoted price.
You make it easy for a low-baller if you solicit price
quotes over the telephone. You make it difficult for a low-baller
if you make sure the price quotes you get have not lapsed,
are fully adjusted and complete.
