How many quotes should you get when shopping for a mortgage?

Myth #18: Handful of quotes is all I need

How many quotes should you get when shopping for a mortgage? This is a question that is commonly asked by people shopping for home loan quotes. Even though this is the most important question a mortgage shopper can ask, unfortunately, the majority of those shopping for the best possible home loan rate are unable to arrive at the correct answer

Generally speaking, when shopping for mortgage rates, most people believe that they only need to get quotes from a handful of loan officers from few banks/lenders. This is simply not true.

The truth is, a few quotes will not help you whatsoever due to one reason. Despite a popular myth, it is the Loan officers (who are set on different commissions) competing, and not the Lenders/banks. In other words, Lenders DO NOT compete. If the Lenders competed you can easily call Mr. Wells Fargo or Mrs. Chase and jot down the rates and make a smart comparison without having to go through the pain of getting sales calls for weeks on end and having your credit ruined by the comparison shops like Lending Tree, Zillow or Bankrate.

This also means that even if you were to get two quotes from the same lender, the quotes could be completely different if you were to go through different loan officers, regardless of the fact that both quotes originated from the same lender. The only way to get the best available mortgage rate quote is to get quotes from as many loan officers as is possible. Accessing these quotes anonymously is also important to keep your privacy and protect your credit score.

Because mortgage quotes operate in this way, the process of obtaining them can be difficult, confusing, and exhausting. Not only that, but many home loan shoppers ultimately end up settling for a less-than-desirable rate. There are 400,000 loan officers in the United States – in order for a mortgage shopper to get the best rate possible, he or she needs to be able to reach as many loan officers as possible.

The best way to reach out to as many home loan officers as possible is to use the Parlend online mortgage rate calculator and LO Finder. Getting a mortgage quote online through Parlend will allow a mortgage shopper to anonymously reach out to a wide range of loan officers. This has the added benefit of cutting down on conversations with salesman-like loan officers. Instead, a user can access accurate pricing in real-time based on his or her own individual risk profile. Parlend expedites this process so as to help a mortgage shopper to quickly see the best options available to him or her, thus ensuring that the shopper can easily make the best possible decision.

 

Myth # 1: Conforming loan is the only way to go


Check out our free mortgage shopping tools at https://www.parlend.com

Are direct lenders preferable when shopping for a mortgage?

Myth # 17: Direct lenders can get me the best deal

Direct lenders advertise themselves as being preferable loan sources by giving mortgage shoppers the impression that direct loan rates are lower than those offered indirectly. However, most mortgage shoppers are not aware of the fact that there is little to no difference between direct and indirect loans. Direct loans are not necessarily cheaper, faster, or better than indirect loans. In fact, the primary purpose of the term direct loan is to help a lender maneuver the difficult task of differentiating itself from other lenders when comparing loan rates side by side.

A direct lender, in simple terms, is a lending institution that loans out its own money and then uses its own resources to service the loan and collect the payments. Under this definition, banks and credit unions can be considered direct lenders. Think of the term “Direct Lender” like a dry cleaner’s “In-house” cleaning as opposed to sending to an outside plant.

There are a few advantages to using a direct lender. For example, jumbo loans are typically kept on the lender’s books and the costs of underwriting are lower when using a direct loan. However, while these facts are advantageous, they do not actually lower the cost of the loan rate. Many borrowers wrongly assume that if they cut out the middleman and use a direct lender that they will save money. Unfortunately, this is not true. Regardless of if a loan is direct or indirect, the mortgage shopper will still have to go through a commissioned loan officer to acquire the loan, which can add to the expense of the mortgage rate.

The best way to get a good mortgage rate is to compare mortgage rates and lenders using the Parlend mortgage calculator. Shopping for mortgage rates can be a complicated process, regardless of if you are looking for a direct or indirect lender – opting to shop for mortgage lenders anonymously and online can help you to find the best possible rate according to your own individual risk profile. Parlend offers mortgage shoppers the advantage of allowing them to compare rates between a wide range of lenders – regardless of if those lenders offer direct or indirect mortgage financing.

 

Myth # 18: A handful of quotes is all I need


Check out our free mortgage shopping tools at https://www.parlend.com

What closing costs are important to look for when shopping for a new mortgage?

Myth # 16: Closing costs are closing cost.

The closing cost can be color-coded by potential borrower saving, Red being the most and Green the least savings possible. We have marked a Loan Estimate for your reference at the end of this article.

  1. Box A (See below). (Potential savings: 1k to 100k). This is the most important box that matters to you and it includes origination, Application, underwriting and processing all of which are often manipulated by lenders in order to maximize profit. This is the highest $$ ticket, therefore, the most important.closing-cost-box-a-origination-charges
  2. Box H and C (See below) are mainly your title fees. (Potential savings: $200 to $500). Box H Owners title policy is optional and frankly completely useless and most people do not get it. Can you shop Box C? YES, but do you want to? Not really, there are only a handful of big title companies in the US and good luck calling one and trying to shop for title insurance as a borrower. They rarely deal with borrowers directly on fees and will likely ignore youclosing-cost-box-h-other-c-shopable-services
  3. Box B, E, F, G (See below) (Potential savings: NOTHING). Collecting escrow is never straightforward from lender to lender. You could have one collect 3 months of escrow and another 6 months, making your prepaid completely different. You don’t have control over this, so there is no need to waste your time on this. If you want to spend several hours trying to save $5 dollars here is your chance.closing-cost-box-b-non-shopable-services-box-e-f-g-other-costs

Color-coded Reference Loan estimate

closing-cost-details

To learn more about Parlend’s unique mortgage calculator that calculates your fair mortgage rate and the closing cost that corresponds to it click here. (NOT All Mortgage Calculators are created equal)

 

Myth # 17: Direct lenders can get me the best deal


Check out our free mortgage shopping tools at https://www.parlend.com

What is the par mortgage rate, and how does it affect me as a home buyer?

Myth # 15: Par is the lowest rate my LO offers me

As a first time home buyer, you may have encountered the term par mortgage rate. While most people generally understand the concept of a basic mortgage rate, they may not be familiar with a par mortgage rate or the effect it can have on a buyer’s ability to purchase a home. Understanding a par mortgage rate is an imperative element when it comes to getting the best possible mortgage quote.

Definition

Essentially, this is an interest rate that may be a reference point where a lender will not offer a rebate or have discount points required. In addition, a par mortgage rate may be what a lender will pay another bank or lending institution the value for an already existing mortgage. This also includes the calculation of placing a value on mortgaging servicing rights. (Source: Business Dictionary)

Put simply for first time home buyers, the par rate is the interest rate that you will qualify for from a lending institution or bank if there is no manipulation of the standard interest rate. Yield spread premium (YSP) is what a lender makes when they sell at a higher rate. Discount points are paid by the borrower to get a below-par rate.

Your goal should be to eliminate discounts and get as much YSP as possible. For this, you will need a calculator that shows what a fair discount/YSP is for your risk profile. You can find this one-of-a-kind tool at Parlend.  Once you determine your par rate, you will be in a much better position to negotiate.

How Par Rate Works for You

The simplest way to understand a par rate mortgage is to think of it as the base interest rate you will get. Of course, this is assuming that there is no manipulation of the rate due to outside factors. A par rate mortgage provides a baseline from which you can start formulating calculations in regard to your potential mortgage rates. Using this as a starting point can help you to get seek out the best possible mortgage rate quote.

One factor that can profoundly impact a buyer’s par mortgage rate is a buyer’s credit score. A person with a bad credit score is likely to have a higher par rate, while someone with good credit may enjoy lower par rates. However, it is important to remember that the rate may be further manipulated, which may offer better rate opportunities for both the borrower and the lender. For example, a buyer with a good credit score will be considered low-risk by the lender. This might encourage the lender to adjust the interest rate in such a way as to provide the buyer with more cash credit which would help to offset additional fees such as closing costs. Calculating your par rate in advance using a mortgage calculator such as  Parlend’s Par Rate Calculator can help you to take advantage of opportunities like this.

If you are shopping for a mortgage for your future home, understanding the par mortgage rate is an essential piece of your overall mortgage rate calculation. Knowing your par rate will ultimately ensure that you make the right decision regarding whether or not the home you intend to purchase will fit within your budget. It will also help you to seek out ways to get the best deal possible on your home loan rate quote.

 

Myth # 16: Closing costs are closing cost


Check out our free mortgage shopping tools at https://www.parlend.com

 

NOT All Mortgage Calculators are created equal

Myth # 14: Every online home calculator is the same

Shopping for a new home in the internet age gives home buyers a unique advantage over those who purchased properties in the days before the internet. The mortgage rate calculator has changed the way many people shop for a loan by empowering them with access to a wealth of information. Prior to the internet, those shopping for a mortgage rate quote were limited to local banks and lenders. Today, however, home buyers can shop for their mortgage quotes online using invaluable tools such as rate calculators. This allows buyers to find and select the best rates possible.

How does a mortgage rate calculator work?

Mortgage lenders’ websites typically include their own calculators. These calculators provide you with a basic mortgage rate quote based upon basic information such as:

  • Home Value
  • Down Payment
  • Loan Amount
  • Loan Terms

These calculators will also typically ask about your home loan rate as well so that it can calculate your monthly payment. This is the inherent issue with most mortgage rate calculators. Without having access to actual mortgage rates, you are stuck picking a random rate that you may or may not actually end up having.

Instead, a mortgage calculator should automatically provide you with the lowest interest rate available to you. This is the only way that you will be able to get an accurate estimate of your potential monthly payment. Parlend’s mortgage rate calculator not only calculates your risk profile in real time, but it also factors in home loan rates from every single major bank and lender. Over a thousand loan officers representing all major lenders are researched and priced against your own unique criteria and risk profile.

 

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Parlend Gives You Access To The Best Rates Available To You

Lenders employ over 400,000 loan officers – each of whom fall under a different commission structure for the loans that they sell. Given this number, it is impossible for a home loan shopper to research every mortgage quote available on his or her own. That’s why we built Parlend so that we can handle this task for you, all within minutes, anonymously.

It is also important to consider the fact that basic loan and monthly premiums are only a part of what you pay. This means that when factoring the overall expense of your home loan, you will also need to account for things such as closing costs, which are made up of three major parts. Keeping this in mind will benefit you in the long run when shopping for a mortgage rate quote. You can find more information about this here.

 

Myth # 15: Par is the lowest rate my LO offers me


Check out our free mortgage shopping tools at https://www.parlend.com

How to find the best Mortgage Rate?

On the journey of buying a new home, one of the most important steps is to get the best possible mortgage in terms of overall cost. There a few things you can do to ensure that you have access to a lower interest rate, and therefore lower monthly mortgage payments. This can save you thousands of dollars over time. While it may not be easy to get the exact rate you want, the following steps can help reduce the cost of your monthly payments.

Take action so as to ensure you have the best possible FICO score

Every single lender will review your credit score and credit history. This helps them determine the potential risk of lending to you. The lower your credit score, greater the risk you will appear to be. If you seem like a high risk to a lender, the lender will be far more likely to increase the interest rate offered on your mortgage. Over time, a high-interest rate can add up to thousands of dollars.

This means that it is important that you do what you can to improve your credit score prior to mortgage shopping – even if it causes a delay to your home shopping process. While it is important to establish a good credit history over time, if it is urgent that you improve your credit score in a shorter time frame, companies such as Lexington Law are there to help you. For approximately $120 a month, Lexington Law can improve your credit score in fewer than five months. It’s important to keep your end goal in sight: the higher your credit score, the lower your monthly payment, which will increase your buying power and help you on the path to getting the best available mortgage rate.

Build up a down payment

If you don’t have the time needed to repair a bad credit score, then a good alternative is to make a larger down payment. A large down payment lowers your perceived lending risk and can allow for a lower credit score. Even if you have good credit, a large down payment can lower the amount you will pay towards interest on your mortgage. This will also decrease the total amount you spend on your mortgage over time.

Shop Loan Officer’s not Lenders 

According to the Consumer Financial Protection Bureau (CFPB), 50% of mortgage borrowers do not shop around when deciding on a mortgage. Even though mortgage comparison sites allow shoppers to browse through rates offered by a range of lenders, this does not necessarily allow them to see the best possible rates available to their own unique financial situation.

This is because interest rates not only vary by lending institution but by loan officers as well. Even though two loan officers might work for the same lender or bank, they are likely on different commission rates, thus allowing them to offer completely different rates for the same mortgage to the same borrower. Therefore, it is imperative that you shop around with as many different loan officers as possible – both on and offline.

Consider Additional Costs

Often times, first-time home buyers forget to consider the additional costs that come with the purchase of a property. You should always be on the lookout for the fees and additional costs that may come along with the purchase of your new home. In some cases, it may be possible to avoid or reduce the cost of these fees. Be sure to review your Loan Estimate so as to ensure that the rate versus cost is appropriately proportioned.

An easy way to be sure you are aware of any potential additional costs is to utilize Parlend’s patent-pending mortgage calculator. This mortgage quote calculator is available online and can show you any additional costs that will go along with a given rate, based on your own unique risk profile.

Get Pre-qualified without getting your credit pulled

When it comes to purchasing a mortgage, there are two ways to get qualified:

  1. Pre-qualification
  2. Pre-approval

Pre-qualification does not necessarily require a credit pull. Instead, your agent only has to know that you have sufficient credentials to obtain a mortgage and that you will be qualified. An easy way to get pre-qualified without having your credit pulled is to use Parlend’s instant online mortgage pre-qualification feature as you begin the process of shopping for a mortgage rate quote.

Conversely, pre-approval requires that you go through the process of submitting your income and asset documentation for underwriting in advance. The downside of this is that when you actually do find and purchase a house, you will have to go through this process again. However, if you are unsure about your credit or income, then this is likely the best method for you.

Conclusion

Finding the best mortgage rate before finding your house is like trying to find the cheapest gas station before you buy a car. By taking the time to find the best deal ahead of time, you put yourself in a better financial position for a better home-buying experience. Not only that but finding the best mortgage quote can mean saving thousands of dollars on the cost of your mortgage.


Check out our free mortgage shopping tools at https://www.parlend.com