Should i disclose rates of competing lenders when shopping around

Question

Hi Guys,

I just got under contract for my first duplex and am exploring my loan options. I've decided to go with a 15% down conventional loan. I'm shopping for rates and one lender has offered me a 4.5% interest loan. I was planning to go with this since it's a very low rate but i wanted to shop around to make sure that this is the best that i can find.

My questions is, should I disclose to other lenders that I already found a 4.5% loan? Would this make the lenders more likely to compete and offer lower interest rates or does this come across as offensive to other lenders?

Any advice is appreciated!

Kevin Romines · Answer

A quoted rate is not binding or doesn't really mean anything until you have an LE or Loan Estimate in hand. Once you have that, you then have a commitment from the lender that barring a program or eligibility change, this will be their fees and rates. Once you have an LE, you can then get competing LE's from other lenders.

Remember, verbal quoted rates and fees mean nothing, put it in writing, then you got something you can hang a hat on!!!

PS, basing your choice of lenders purely off the quoted rate doesn't tell you anything about their performance. Be careful about just going with the least expensive deal? This is a relationship business, can they perform and will you want to use them going forward? You need to understand who can get you from point A to point B with regard to your investing plans. That's who I would be working with, not just the lowest quoted rates?

Alex Nelson · Answer

@Diana Muresan

Technically it's not a problem with the loan, it's a problem with the purchase. The seller of my property has an IRS lien against him so we have to get this property released from the lien so that I can purchase it. Unfortunately I can't do that until the IRS is opened back up, so until then we're stuck twiddling our thumbs hoping the government opens back up soon.

Diana Muresan · Answer

@Alex Nelson then it sounds great. Stay where you are, only that I am confused what a confused what a conventional loan has to do with the government shut down? Perhaps it’s an FHA loan and not conventional? Conventional loans are not affected by the govt been shut down

Diana Muresan · Answer

@Alex Nelson does that rate include origination or discount? Is it FHA or conventional? If no discount or origination points than I assume is a 1st time homebuyer program. Anyway, most bankers lie, they often quote a 1 day lock which is not feasible, you need an at least 23 days lock. I never take buyers that show around because I can’t compete with lying ... most of my business comes from realtors, sometimes a client will say what amazing rate they received from a retail bank and I say great, go there. But then I receive their quote and it has origination and Discount and they are not even aware. Always look at the going rates and figure out your  rate will be about 0.125%-0.25% higher as those rates published online are truly a teaser, plus the unknown of working with someone no one can recommend. More importantly these online deals are leads given to bank employees, no successful or top producer banker will sit in a cubicle working on in-house leads

Jay Hinrichs · Answer

for instance I wont sell one of my new constructions if the buyer is using Rocket.. they are beyond redicules and furious all in the same sentence.. and wells can be a challenge as well

Alex Nelson · Answer

@Kevin Romines

Absolutely, I have this rate in writing and have actually locked in the rate with my lender already. I'm currently stuck in limbo with a tax lien on the property and the IRS being shut down, so I'm shopping around to see if any one else could match the rate I've already locked in.

I'm curious by what you mean when you say "can they perform" and "can they get you from point A to point B". obviously I want them to get to close with me, but any mortgage company will do that. What is there other than the rate that would make you chose one lender over the other? Once I move onto the next property, I can always shop around again to see who has the best rates for the next place. It seems to me that the lowest rate would get me where i want to go the fastest considering they aren't charging any extra points or fees to get that rate.

I appreciate your input!

Alex Nelson · Answer

@Scott D Burrows

I actually got this rate through Redfin Mortgage. I tried to shop around with the smaller/local lenders but no one has been able to come close to the Redfin rate. I've heard people say not to go with the big companies for mortgages but with a rate like this and no extra points or fee's, I don't know why I'd go elsewhere. Most of the other lenders I've talked to offer in the low 5's.

Scott D Burrows · Answer

@Alex Nelson

That is an AMAZING rate. Would definitely take it if you can.

In fact, would you mind sharing who that is?

Also, I would try sharing the rate. Lenders make money by how much they mark up prime, quantities, amounts, etc. Just depends on how their company incentivizes them.

If most of your lenders are like the ones that I call, they talk for quite a while before even finding out what I want to do with the loan or rate that I'm looking to get, if they know your rate prior to going off on a tangent, it may let them know if they can offer you something or if your rate is so good that they can't compete, leading to a more efficient conversation.

Worst case scenario: You tick someone off.

Best case: You get a better rate.

However, just be careful with your current, small bank, local lenders. Of course, they know that we shop. However, it is just tactful to not bate them, if you plan on doing business with them in the future.

Good luck and let me know how it goes!

-Scott

Chris Mason · Answer

The fallout rate for preapproved buyers is actually about 35% according to some academics studying Oakland CA. Any realtor will tell you it isn't evenly distributed; some lenders it's down in the single digits (we find ourselves invited to their birthday parties...), others it's over half.

Not shown on there is "applied for preapproval" and "preapproved." "Application" is gov't speak for "in escrow," which generally means someone had a letter with the words "preapproved" or "prequalified" somewhere on it. "Originations" is gov't speak for "actually closed."

812 / 1262 = 64%, meaning 36% failed to close.

Statewide numbers, the same 64% / 36% ratio.

Based on HMDA data.

Lenders are currently not required to disclose their fallout rate, average time to close, etc.

Diana Muresan · Answer

@Alex Nelson gotcha. I thought it had to do with the IRS transcripts

Should i disclose rates of competing lenders when shopping around

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