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How to Shop for Rates?
You will be told everywhere that you need to shop for rates when looking for a mortgage. But nobody will actually tell you how to shop for rates. If you do not understand how loans are priced and what lock-in periods are, calling up a lender to find out their interest rate could provide you with mostly useless information.
Basically, if you simply call up and ask for interest rates, a lender can tell you anything. One lender may quote a floating rate with seven or twelve day lock. As for another may he will quote you a forty-five day lock. Another lender may quote you the rate for two points and another may quote you the rate for one point. If you call lenders on different days, you could get widely different quotes because rates don't stay the same every day. That isn't shopping for interest rates.
In fact when you call a lender to shop for rates, you first have to know in advance at least two things: how many points you want to pay and how long you want to lock in the rate in order to have the same parameters so that you get meaningful quotes to compare offers.
Lenders are accustomed to borrowers calling up to get a rate quote. They know that you are calling up their competitors. But if you ask for a rate quote for a specific lock-in period paying a specific amount of points, most lenders will be impressed and give you a reliable quote. Besides you are exerting pressure to get a great quote. You will let the loan officer know you are shopping around to have the best deal. You have more chance to get a better rate.
The best way to start shopping for rates remains getting a referral from a real estate agent or a friend, and then from this point you can shop other lenders. You have to do it very professionally, telling the lenders how much you are willing to pay in points and how long you want to lock in the rate. Make all your calls on the same day. Then get the best quote under those conditions. After gathering these pieces of information you should call the lender who was referred to you. Tell him what you found out and he will tell you if the rate is reliable or not and whether he will match it. Eventually you can make your final decision.
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