The Worst Way to Shop for a Home Mortgage

You've found a house that is perfect for you. It is so appealing that you're willing to endure the hassle of obtaining a mortgage.

It is downright frustrating to shop for a mortgage these days. First of all, some stranger wants to know how much you make and how much you have in the bank. Then you have to show someone your recent tax returns. I don't know about you, but I don't even tell my best friend that information. Why should I tell some stranger? This disclosure is the price of getting a loan, though.

Have you heard about the best way to get a mortgage?

The real short-cut to finding a loan is to look on the Internet. Everyone knows you can get a better deal on the Internet. Here's a tip. Try to find a company that has outsourced their lending function to Indonesia, where they pay workers next to nothing. Your salary is going to sound like a sum fit for a king, even if it is near minimum wage.

Feeling a little more at ease? Let me assure you, you have nothing to fear. This mortgage thing is a piece of cake as long as you follow along with me. The next step is find every web site that has an application form.

It's simple. It's fast. It's painless. Plus, it's free!

Name, address, social security number. Then again, perhaps you should leave that field blank. No reason to share that with some stranger until you know that you're getting the best deal.

A word of caution. You need to be careful about identify theft, the latest crime wave to hit Fox News channel.

They report that people pretending to be you could be dangerous, if not very costly. The way to prevent someone in Indonesia from using your identity to buy a new car or something is to pretend being someone else on the application from the start. This trick eliminates the whole problem.

The way I figure it, they can't steal the identity of an imaginary person.

Only after you've figured out who you want to work with should you can give them your true information. For now, all they need to know is that you have a job and can afford the house.

Many times you don't need to fill out an application. Your loan is bound to be simple, right? Sometimes it's easier just to call (as long as they have a toll-free number) or email them and ask them for their best deal. The ones that really want your business will give you their best rate over the phone. It might just be a ballpark number you get from them, so don't worry about anything past the decimal point.

5.875% 5.25% 5.125% all easily fit into the 5% bracket.

What ever you do, be nice when you're on the phone. But don't commit to anything. Use your spouse as an excuse. Keep them on the phone for a long time to be polite, after all they probably want to hear all about the house you're buying. They love kitchens, so tell them all about the kitchen.

If someone happens to give you a rate under 5%, then you've met a winner. People who quote you higher rates are just being greedy.

Works like a charm, doesn't it?

For you emailing rate shoppers, imagine you're on the other end of the table. Someone sends you an email out of the blue. The person tells you how much the home costs, how much he's going to put down and explains he's got perfect credit. Then he expects a rate lock guarantee with a number that blows away the competition. A quick look at the message header line reveals that the 20 other mortgage lenders received this same message.

A More Effective Way to Work

That's a big no-no when trying to get a mortgage broker to take you seriously.

The problem here is that you've told the lender that all you care about is having someone give you a low estimate. And many people will gladly take you down this primrose garden path.

Then the unpleasantness of a shockingly higher interest rate or closing costs await you at closing.

My advice?

1. Don't apply to everyone. Research the person or company you are considering. Read between the lines of what they have on their web site. Is the information helpful, or are they just talking about themselves and their success?

If you want someone to help you, look for someone who is helpful. Otherwise just go to someone who treats his job like a 'mortgage factory' and people like raw materials on an assembly line. Do business with someone who specializes in working with clients with needs similar to yours.

2. Answer their questions truthfully from the beginning. Don't misrepresent yourself or your intentions. Listen to their answers. Is this someone you can work with?

Although it might feel like you are bearing your soul and revealing your darkest secret, how much you made last year has no bearing on what a professional lender thinks about you. It is used as one number to fit into the complex equation of the loan qualification.

3. Don't expect to immediately be given an interest rate based on sketchy or incomplete information.

Of course price is important, but don't focus solely on shaving every last penny. Nobody works for free. You can easily find people, that offer zero down loans. This is not the same as a no cost loan.

Lastly, you are entering into a relationship with your lender, as opposed to a one night stand. As with any relationship, expect some give and take, some discussions about your goals and objectives. You'd be surprised how much smoother the whole process goes if you tell your lender your needs.

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