Why Rate Shopping Can Be Misleading
Imagine:
Loan A: Higher interest rate, low lender costs.
Loan B: Lower interest rate, thousands of dollars in discount points.
Which is cheaper?
You cannot answer from the rate alone.
What Should You Compare?
Ask each lender for comparable scenarios.
Interest Rate
The contractual rate used to calculate interest.
APR
Annual Percentage Rate is designed to reflect certain financing costs in addition to the interest rate, although it is not a perfect measure for every decision.
Points
Did you pay extra upfront to obtain that rate?
Lender Fees
What does the lender charge?
Mortgage Insurance
Does the loan require it?
Cash to Close
How much money do you actually need?
Monthly Payment
Compare the complete projected housing payment.
Loan Term
A 15-year and 30-year loan should not be compared merely by rate.
Fixed vs. Adjustable
Are you comparing equivalent risk structures?
Compare on the Same Day When Possible
Mortgage pricing can move.
A lender quoting Monday and another quoting Friday may not be competing under identical market conditions.
Try to compare similar loan scenarios during a similar time period.
Beware of the Advertisement
"Rates as low as..."
Ask:
- For whom?
- What credit profile?
- What down payment?
- How many points?
- Which property type?
- Primary residence?
- What loan size?
- What fees?
- When was the rate available?
The giant number in an advertisement is not your Loan Estimate.
Why Closing Reliability Matters
A mortgage is not valuable if the lender cannot close the transaction.
In a competitive real estate transaction, lender performance can matter.
Consider:
- Communication
- Underwriting
- Availability
- Local/property experience
- Appraisal management
- Closing record
- Ability to meet contract deadlines
Example
Lender A appears $500 cheaper.
Lender B communicates quickly, has fully reviewed your file and can confidently meet a critical closing deadline.
The answer may still be Lender A, but the decision should include execution risk, not merely $500.
Ask for a Loan Estimate
For applicable mortgage transactions, the standardized Loan Estimate helps consumers compare important loan terms and projected costs.
Look at the document, not merely a text message saying "5.75%!!!"
How Long Will You Keep the Loan?
This matters when comparing:
- Points
- Rate
- Upfront costs
A loan designed to save money over ten years may not be economical if you refinance in eighteen months.
How Lisa Helps
Lisa does not tell you which lender to choose.
But she does care whether the financing supports the transaction.
Lisa can help you think about:
- Contract deadlines
- Seller expectations
- Property type
- Condo financing
- New construction
- Appraisal
- Assumable mortgage alternatives
- Negotiated seller concessions
Your lender should explain the actual financing.
