The Financial Race.

We have all heard it before.  Seen the commercials, had a pop up on the computer, heard an ad on the radio.  Certainly seems like the best idea ever.  The lower the rate,  the lower your payment and why not search the entire internet to find that person that can give you the lowest rate?

Here is what people don’t realize.  You aren’t really searching a whole internet of bankers and mortgage brokers.  You are searching that particular site of the people that have chosen to pay to be there.  Some mortgage professionals have decided the best way to build their business is to pay for leads.  When you put an inquiry into a site your name is then sold to any number of people depending on how much the person buying the leads is willing to pay.  For example, if a mortgage provider pays $100 for every name that is sent to them, they may be the only one to get your name.  However, if the price is only $10 a name then the name might be sold to ten potential mortgage providers.  In any event, you don’t have all banks competing and potentially not even the best banks completing.

You may still end up with a great rate or great service and be completely happy.  Just because someone buys leads to start their business or to supplement their business model doesn’t mean that they are incompetent and can’t do a good job.  However, in the past month alone I have had two examples of where internet shopping went bad for people.

First I had a friend tell me that she had responded to an online solicitation.  After she got through the typical embarrassment of someone saying to me that they talked to someone else before talking to me because they like to keep their information “private” from friends she went on to ask me for my advice on the situation.  I obliged and went over the paperwork with her and my concerns on whether the mortgage would close based on appraisal concerns, which is typical when you have an online mortgage originator who doesn’t have an intimate knowledge of the area.  Everything else appeared normal and told her to proceed as long as she was willing to risk the price of the appraisal.  I followed up for the next few weeks and was told that her mortgage broker told her she was “all set, closing soon” at each time.  Then I got the call out of the blue with, “’You were right, I should have listened to you.  He just called and told me he can’t get it done because of the appraisal.”  I’m married so I rarely hear the words, “you were right” so once I realized what I heard I continued with the conversation and while it didn’t feel good it hadn’t worked out for her it was good to hear her state why this is why you need to know and trust the people you work with and would be sending me every referral she had.

The second example occurred when I got a call from a Realtor that had someone who had shopped online for a mortgage to “get the best deal” and wasn’t sure if they were getting a good deal.  He asked if I could help them understand the disclosures that had been sent to them by a mortgage originator in Boston.   As a courtesy to him I told him I would help them understand their product and paperwork in the interest of helping him get them into their new home.  This couple stated that they had received two sets of disclosures yet really didn’t know what type of loan they were in or any of the caveats with it.  The loan was set up correctly and was the correct product so the concern here was that when someone spends their day making cold calls and paying for leads then their business is not based on service and in face interaction.  Being able to see someone in person gives me the opportunity to read their body language so when there are things that it looks like they need more explanation on I can then provide that for them.  That’s not something that can occur on the phone or internet.  If knowing and understanding what you are doing as you make the decision to take on the biggest household debt you have then meeting with someone local is likely to be your best bet.

We all fish in the same pond.  Rates are determined by lenders, the secondary market, and mortgage backed securities.  Most professionals will have access to the same products so make sure you know the person has a strong reputation for professionalism, service, and community support.  Make your decisions based on referrals of family and friends that have had positive experiences and remember the best rate in the wrong mortgage will cost you more in the long run than a good rate in the right program.