|Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.|
Mortgage Myth: All Lenders are the Same
If that were only true – it would make shopping for a mortgage so much easier. However, the reality is there is much to differentiate one lender from the next, the least of which are the interest rates they offer. The home buying process can be very complex with many moving parts. You can’t possibly be expected to understand all of the intricate steps, let alone know they are being completed correctly. You also need to be able to trust that what a lender tells you is true and count on their guidance. While finding the best possible interest rate is important, there are too many other things that can wrong in the process, which makes rate comparisons only one way to choose a lender.
Comparing Interest Rates
When shopping for a lender, most people start with comparing interest rates. The problem is the interest rate is only the tip of the iceberg when it comes to understanding the total cost of the loan. With all of the points and fees lenders add to their mortgage package, it is very difficult to make an apples-to-apples comparison. Just know that the loan market is very competitive; so, when shopping among several lenders, you may notice that the rates and fees will tend to converge, making the difference between loan costs less of an issue.
Product-Centric or Customer-Centric
You may not notice until you have met with a few lenders that some tend to be more product-oriented than customer-oriented. While all lenders can demonstrate comprehensive knowledge of the home buying process, not all are willing to take the time to understand your personal situation and goals, so they can present loan product options specific to your needs. When you realize how many loans fall through because the lender did not fully understand your needs or circumstance, or the process was not fully explained, you will realize how important the lender’s customer orientation is to the process.
It should be a major red flag if the lender does not take the time to ask you questions about your situation or goals. This is important because you should know if the loan being recommended is some off-the-shelf product the lender is promoting, or one that is selected based on your particular needs and objectives. Equally important, he will consult with you on your price point and all of your expenses to make sure you can afford the home you want to buy.
You will get a sense of whether the lender is taking a personal interest in you or is simply following the steps of the process. It can mean the difference between getting the right loan at the right price and on time or struggling through an uncomfortable experience wondering if you made the right choice.
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