There are so many mortgage lenders, how do I find the best rate without messing up my credit rating?

Question

800+ credit rating,
San Diego, California
10-15% down payment
Need approximately $200,000 loan to purchase my first home or condo

As you can see, I have an excellent credit rating that I am very proud of. I have been told that up to 4 mortgage lenders can look at my credit before it starts to negatively affect my rating. My question is: how in the world can I find the very best rate available to me when there are hundreds of lenders out there but I can only ask a handful for pre-approval before my credit rating starts going down. I'm familiar with sites like Bankrate.com, but I've been told that the listings on those sites are paid advertisements and that the rates listed are often impossible to get in real life. Can anyone help with suggestions for how to narrow down the hundreds to maybe 10 or so that I can take a closer look at?

Forgot to say that I'm looking for a 30-year fixed rate, in case it matters.

I also should have said that I have asked a handful of lenders already if I can provide them with a copy of my credit report instead of them asking for it, and they have all said THEY need to request it directly. Is this an unusual policy, and should I automatically avoid lenders who do this? One of them was my bank, Bank of America, so I assume they are trustworthy...

Answer 1

The FICO scoring process "thinks" you are desperate for money if you apply for too many loans.

There may be a lot of lenders, but there are not that many worth considering.

The big national lenders are # 1 Countrywide Financial and # 2 Indymac Bank. Both of these companies have sub-prime problems. I suggest you avoid these. Their rates will be higher when other people won’t buy their mortgages.

Bank of America, Wells Fargo and Wachovia Bank are good ones.

I have experience with 1 on-line lender, which I like. It is Quicken Loans (URLis below). These folks lend their own money.

Answer 2

You're exactly right that the published rates on those advertisements typically aren't available for any real loans. Usually they're just a marketing ploy.
There's nothing wrong with taking your own credit report to various lenders to obtain quotes. Keep in mind that, according to the credit bureaus, similar credit inquiries (i.e. all mortgage related inquiries) will be treated as the same inquiry in a 30 day time frame. There's not a certain number of inquiries, but rather a time frame. Basically this means that multiple credit inquiries from different mortgage companies/banks won't hurt your score if they happen at the same time. Just don't wait too long between credit pulls.
That being said, if you pick 3 or 4 lenders to give you a quote and a complete Good Faith Estimate of their charges then you should get a pretty good idea of what's available to you for your new loan.
Personally I'd get quotes from brokers or bankers referred to me by my friends or family first. After that I'd check with the local chamber of commerce or BBB. I'd only resort to the internet sites as a last resort if I couldn't find anyone else.

Answer 3

Previous responders have given you some good information in relation to using a credit report thatyou supply for preliminary comparisons. You can get a free copy of your credit report without having to sign up for anything elase at the US Government site annualcreditreport.com.

I've been a mortgage lender for more than 20 years and I can tell you this; we all sell to the same investors. There really isn't that much of a rate differential. Where you will see a difference is in the fees required for your financing. In order to determine which offer is most cost effective you need to compare both fees and rate. You can do this by comparing Truth In lending Disclosures. This disclosure shows you the cost of the financing expressed in an Annual Percentage Raate (APR). The closer the APR is to the interest rate quoted to more cost effective the financing.

Finally, remember rate and fee are only a couple of components of what makes a loan the right one for your particular needs and goals. Choose your loan officer with the same care you would show in choosing a physician or your child's care provider. You are looking for someone who spends more time listening to you than they do selling you themselves. Watch out for the "I can get you the lowest rate" sharks and stay away from the trolls in here.

With your credit score and funds availability you are an A+ paper borrower. Don't pay more than a 1% loan fee and look for the lowest quote from the person you feel you can trust most. There are good and bad loan officers at every lender. You might call a local title company and ask their best escrow officer for a couple of recommendations for loan officers to interview. She'll know how has smooth closings and happy borrowers.

Answer 4

Some really good answers here, but I had to give 'FinancingLoans' the thumbs up for the tirade on Marty.

Avoid internet lenders, many will sell your information to other lenders and your credit rating can take a huge hit.

Answer 5

Very simple. Get a copy of your OWN credit score which you can take to various lenders for purposes of loan rate comparison. Don't give any lenders authority to check your credit file. You can obtain a free copy of your credit report, and there is a small additional fee to obtain the credit score.

Once you have located one or two lenders with whom you feel comfortable, only then allow them to check your credit file.

Answer 6

They have to pull your report so they can run your file thru automated underwriting.
Although, some can usually eyeball the deal and tell if you are good to go... especially with an 8oo fico

FICO doesn't care if you apply with one bank or 5000 banks.... as long as it is withing 30days.
All 'mortgage inquiries' within 30 days of each other are treated as one.
Get a GFE from 3 or 4 lenders and go with it.
They should all be within .125% - .25% of each other

Answer 7

Doesnt matter.

This is what you need to do. Say I know the bank is going to pay your YSP (yield spread premium) you want to charge me a 1% origination fee. Im willing to give you 2 points total. 1 from the bank, 1 from me. What is the rate at Par (meaning the bank doesnt pay YSP). And me paying you 2 points. What is it if the bank pays you 1 point, and I pay you one point. What is it if the bank pays your 2 points on the YSP and I pay you zero.

I want all 3 rates from your rate sheet from 3 different lenders. I will pick the servicer I want. You will have to sign this paper that says you will only make 2% total on origination and YSP. Anything over incase you get back 1.25 instead of 1.0 as I know rates are exact you will credit toward my origination fee.

Also I want to see a copy of the rate sheets. I know they are not for borrower use since they dont show APR. But im sure you are smart enough to figure out the APR for what you are showing me.

When I lock I want to see the lock confirmation showing exactly what your YSP is and I will match that to the 2% we agreed upon. (that they can show you).

You have to know going in. You will conforming Fannie Mae, Freddie Mac, FHA or VA financing. Your rate might be a tiny tiny bit better because of your score. With some companies they will give a .25% bonus on the YSP for scores over 720. Tell them you want that bonus. They get 2 points period.

They dont need to see your credit report to tell you what the rates would be with any company. I work with over 100 lenders, with that information I could tell you exactly where you would be with all of them without seeing your credit.

And so can any other loan officer. Make them sign the 2% letter, and make them give you a copy of the lock showing the YSP. It doesnt always show on the HUDS. I do it for my clients.


**************** UPDATE ******************

Bank of America is right, they will have to pull it themselves. But they dont have to pull it to tell you what the rate would be. You say you are full doc loan, you have 10% down, you have a credit score of 800+. You can call a mortgage broker and they can tell you what Bank of America rates are, as well as WAMU or USBANK, or Wells Fargo ect.

One thing you have to realize most loans for these banks come from brokers. The banks will not kill the brokers (dont bite the hand that feeds you). If you go with my first suggestion asking a broker for a set 2% on origination and YSP. Most brokers would be fine with it.

Point is that broker quoting Bank of America rates will give you a much better rate then if you go into the branch itself. This year alone I have done 3 loans for bank employees, sending them back to their own bank. Even with their discount and my 2% guarantee, their own branch couldnt touch it.

Point is, nobody in the world needs your credit to quote you their best rate. They ask you for credit because it commits you. Dont be stupid.

I like Matz. I have read some of this answers today. He has good advice too.

PS sorry marty if you come back. I dont give thumbs down, but I will kick you out of the room anytime you give an answer like that. How many accounts are you on?

As per Mazz... I totally agree with Mazz no lender will charge you more then 1%. But they will let the bank pay them another 1% or more, thats what you have to be worried about. Thats the YSP. I think Mazz will agree with me on this, no lender is going to just take 1% total (origination fee and YSP combined). Mazz says 1% but thats the 1% you see, not the 2% you dont.

I dont know the state Mazz is in, but I like her answers. The problem is Utah is really strict and I forget how bad people can be screwed in other states. Some states they say underwriting is 1000 dollars. If its only 250, in utah, we can only charge 250 or we lose are license. So I forget about what some brokers do. They charge you 60 bucks for a credit report that cost 18. They charge you 450 for an appraisal that cost 285. We cant do that in Utah. But I know alot of lenders do it, so ask for invoices if you dont live in Utah. I know you can do it in other states.

I forget brokers actually do this. Its not an issue here so I forget to mention it.