Myth # 8: Reach 4 lenders and win
If you think when Lenders compete you can win, you probably watch too many TV commercials. There are roughly around 50 thousand lenders (Brokers and Banks) and 400 thousand loan officers among them. Loan officers work on commission for the most part. To comply with Dodd-Frank the LO typically can set their commission tier at whatever level they choose. That means a higher rate will pay them more commission. Is this illegal? NO. Is it unethical? Should be. It means you will get two offers from two LO’s at the same lender.
Yeah, you are probably saying they told you that they are on a fixed commission and do not operate like the old days. That is probably true because there is a fixed tier payout but the salesman is a salesman and they don’t work for free. So either with a number of loans, dollar amount of volume or something. There is always some incentive and when there is an incentive there is shady business.
You keep hearing the term when lenders compete you win. Is that even true?.
How could that be when Loan officers offer different rate and terms. You are probably under the impression that loan officers from one company will quote you the same rate and cost. The truth is far from it. To show you how crazy this is I asked “15” loan officers within “One” company and often the same “office” and the responding results were:
As you can see the rates quoted were 3.75% to 4.5%. This is not good news for anyone shopping under the slogan of “lenders competing”. Here is another example with all of the big Banks. How do you make sure you get the lowest offer from each lender? by shopping a lot of LO’s thats how.
It means that borrowers have the huge task of reaching every LO with every lender in order to get what they want. Another word they will never get what they want unless they are either super lucky or have all the time in the world.