When Banks Compete...
I am sure most of you have heard the popular catch phrase for Lending Tree, "when banks compete, you win." Well, I hate to break the news to you but, when banks compete, you lose. Let me explain how.
First of all, I am going to let you in on a few little secrets. The mortgage companies and banks that offer loan programs and rates on the Lending Tree website pay thousands of dollars to do so. When I say thousands, what I really mean is 10's of thousands of dollars. If fact, they usually have to pay a set-up fee just to get started that is over $10,000. Then they pay a "per lead fee" and some (if not all) pay another fee when your loan closes. I hate to be the bearer of bad news but those companies don't pay those ridiculous fees to offer you better rates and terms than their competitors. If they did, how would they make all of that marketing expense back? Think about it for a minute. I have talked about bait and switch a few times before so when you are on the Lending Tree website, keep an eye on those low rates and ask yourself how they are able to offer such low rates. Enough said.
Secondly, when you release your social security number to Lending Tree, you are actually releasing it to who knows how many mortgage companies and banks. Do you know what 50 inquiries will do to your 730 credit score? It's definitely not pretty. In fact, I read a mortgage article (I won't say the name of the author because I am not giving away free advertising to my competitors) about a man with impeccable credit that filled out an application on one of those "banks compete for your business" websites. This customer had over 150 inquiries within a 30 day period. His credit score dropped over 160 points. He went from an excellent credit loan program to a sub-prime or bad credit loan program. There was nothing anyone could do to fix the problem. He authorized the company to check his credit. Little did he know that his credit report would be requested so many times.
So the moral of the story is, "when banks compete you lose." Now I am not trying to discourage you from shopping around. But if you do shop around, make sure you finish up your shopping within 14 days of starting. Any credit inquiries within that 14 day window will not hinder your credit score as long as they are all for the same purpose. In other words, don't go car shopping or credit card shopping while your mortgage shopping. Stick to one plan at a time. Also, if you must shop around, pull your own credit report first and ask the mortgage companies your are working with to use that to qualify you for a rate. When you have the results, then settle on a mortgage professional to work with and let them pull their own report. 2 inquiries are better than 50 or 150.
As always, if you have a mortgage or real estate related question, please don't hesitate to contact me. I look forward to earning your business and your trust.
Posted by Jason Lash at 11:13 PM
Mortgage Associations
I have had a few thoughts recently about what is going down with an association I used to belong to. At one point, I let my alliance with this association dictate how I do business with my clients. Recently this non-profit voluntary association started collecting dues in order to belong to it. In return they made promises to enhance business for its members. They promised more branding and advertising to inform the public about the existence of the association. Instead, they are placing ads/articles in Mortgage Industry magazines trying to attract more members to collect dues from. I am sitting here wondering if I am the only one noticing this.
Originally, this association was founded by a professor at a rather large college. This person scrutinized mortgage professionals in a similar way that I do. The major difference is that this person has never originated or processed a mortgage or home loan. Instead he writes books on how to work with mortgage professionals and other financial issues. In exchange for having the privilege of belonging to this association, a mortgage broker or lender would have to publicly display the commitment of this association on their website. They would also have to place the logo of the association on the home page of their website AND also a back link to the professor's website. All in all, I did not have a major problem with that other than I felt his logo was a detraction from the long hours of hard work I put into my site. I would send traffic his way and in return, I would get about 15 hits a month from his.
Now this association has been turned over to certain members. They have implemented this annual fee which is more than most Realtors pay to belong to their respective associations. It is not the National Association of Mortgage Brokers who charge quite a bit less to be a member. NAMB also provides valuable training to mortgage professionals in the hopes of having more competent professionals available to the public. Does the professor's association do that for the public? No. Instead they have this commitment of honesty and full disclosure. Folks, I hope you don't hold it against me but I am not paying a large fee to be talked about in a Mortgage Industry magazine and so I can continue to advertise this association or group on my websites.
I don't need to belong to an association in order to prove to the public that I am honest and up front with ALL of my clients. Instead, I will post my commitment here:
- I commit to you, my clients and potential clients, that I will ALWAYS be up front and honest with each of you about your loan process.
- I commit to you that you will receive a Good Faith Estimate within 3 days of your completed loan application.
- I commit to you that you will receive an honest and fair loan transaction.
- I commit to you that I will lock your loan when you say to lock it. I will prove this by providing a written confirmation of the lock upon your request.
- I guaranty that the closing costs on your Good Faith Estimate will be within 5% of the actual amount found on your final Settlement Statement excepting only 3rd party fees. The industry standard is between 15-25% variance.
- I will NEVER charge junk fees as described in my 2 posts on the subject.
- I will always work for the clients benefit over my own.
This is my commitment to all of you. This is the way I do business and this is the way I will always do business. I hope the fact that I refuse to belong to any association will not affect the chance to earn your business. As always, if any of you have a mortgage or real estate related question OR you want to know more about Mortgage Associations, please don't hesitate to contact me.
Posted by Jason Lash at 9:35 AM
