Website features homebuyers need for accurate rate
Homebuyers who need a mortgage are less likely to use the Internet to find one than existing owners looking to refinance, yet the benefits of online shopping are just as large if not larger for homebuyers.
The problem may be that homebuyers expend so much time and energy on finding the right house that they are relieved to find 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 online can result in lower costs and better decisions than taking the easy path, provided that the website or sites you shop have the right features. This article describes the site features you should look for.
Posted prices: Deal only with sites that receive prices directly from lenders' internal pricing systems. These posted prices are those the lender would lock - commit itself to legally - on the day shown. If the site does not give you a price quote until you are contacted by a loan officer, the price may or may not be the posted price and you can't depend on it.
Single-lender versus multi-lender sites: Multi-lender sites are a great timesaver 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 online article "How Effectively Can You Shop at Multi-Lender websites?"
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 websites 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 adjustable-rate mortgages (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 website 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.
To determine whether the prices on the screen are live, look for an accompanying "as of" date and time. On my site, the time shown is the time the user clicks on the "Calculate" button, because the system bases its calculations on new prices obtained directly from each lender's pricing system every time it does a calculation. Other sites may price only once a day, usually first thing in the morning, which means that a price change during the day will not be shown until the following day. If no time is shown, don't waste yours on that site.
• Contact Jack Guttentag via his website at mtgprofessor.com.
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