Some people think they can trust a quote simply because it came from a major bank. There is one major nationwide bank who is well-known in the mortgage industry for bait-and-switch practices. I talked to former employees and learned that part of their compensation formula includes bringing loans in the door. They are paid more even if the loan is declined. That incentivizes them to lie just to get you to apply for a loan.
Competitive Mortgage Brokers have been known to quote a rate lower than the rate they know they can get at the time of the quote, so that the customer will commit to working with them. If they are smart enough to watch the Bond Market and think rates will go down, they may get lucky and can give you the rate they quoted; but at that point most brokers could do the same.
Don’t assume that a rate quoted over the phone or email is true. Quotes given in any format other than an official Loan Estimate are not legally binding.
There are the solutions I recommend:
The first and most important tip is to work with a loan officer you trust. If a friend or family member had a positive experience with a loan officer, then it is likely you will also.
If you are ready to lock the rate and move forward, then give them a completed loan application and allow them to run your credit. They can then open the loan, lock it, and issue a locked Loan Estimate (LE). That is legally binding.
Before loan estimates were legally binding, I created this form to help people shop for rates. It has a legally binding paragraph above the signature. This is useful when you want to shop around but are not able to lock the rate (e.g. you are not in escrow for your new home yet). It separates “the men from the boys” in that if the loan officer is lying, he will not sign the form.
As noted above, work with someone you can trust. If you are not certain whether you can trust them, ask to see their rate sheet or a screen shot of the automated system they use to price loans. If they show it to you, ask them to explain it. On most rate sheets a price of 99.00 means one-point cost for that rate; a price of 100.00 usually means no points cost. If they will not explain it to you, I recommend choosing another loan officer. What is he or she hiding?
I hope these tips and the Fee Form help you determine if the rate and costs quoted are legitimate. As always, if you have any questions please call me at 877-728-2008 or email CustomerCare@HollyGustlin.com