While every mortgage lender has a web site and would love to have you come by and initiate a transaction, for anyone looking to shop for the best deal, visiting individual lender sites is largely a waste of time. Every site is formatted differently and the data provided may or may not be comparable to that available at any other single-lender site. In contrast, a multi-lender site allows users to compare prices of multiple lenders, uniformly formatted, with one visit.
Yet some multi-lender sites do a much better job for shoppers than others. This article will list the features these sites should have to support effective shopping.
Posted Prices: These are prices obtained directly from each lender's internal pricing system. Without posted prices, shoppers cannot compare prices of different lenders on one multi-lender site. If prices are entered by loan officers (LOs), they may or may not be valid. Some LOs have a habit of "low-balling" prices to snare unwary borrowers, then raising them later on one or another pretext.
Complete Prices: Prices on the site should include all lender charges, not just points. Prices of adjustable rate mortgages should include, in addition to the initial rate and lender charges, the current value of the rate index, the lender's margin, rate adjustment caps, and maximum and minimum rates. Shoppers can't make reliable selections based on incomplete prices.
Real-Time Prices: Prices on the site should always be live. This means that whenever a lender posts new prices on its own site or for its loan officers, prices on the multi-lender site change automatically and simultaneously. Otherwise, shoppers don't know whether the price on the site is live or obsolete. On sites that require manual updating, some lenders have a bad habit of forgetting to do it when interest rates rise, which makes their prices look low compared to others. A good multi=-lender site will not permit that.
Fully-Adjusted Prices: Prices should be fully adjusted for all the transaction characteristics that affect price. This includes loan purpose, property value, down payment, loan amount, property zip code, credit score, property type, occupancy type, lock period, and escrow waiver. If you are not asked about all of these, then you are pricing someone else's loan, not yours.
Any relevant feature of your loan that the site does not ask you about it assumes to be the best possible, which generates the lowest possible price. If the site does not ask for your credit score, for example, it will assume you have a score of 800, which means that if your score is significantly lower, your actual price will be higher. You won't find that out, however, until later.
Anonymous Shopping: A good multi-lender site allows you to shop without revealing contact information to lenders until you select one. If you deal with a site that sells your information to 3 or 4 lenders, expect to be contacted by all of them. These are not the lenders offering the lowest price to you but the lenders offering the highest price for the information about you. The sites that operate this way will provide little or no help in making a selection among the lenders vying for your business.
Price Monitoring: Selecting the lender with the lowest price, even assuming that it is a posted, real-time, complete and fully adjusted price, does not guarantee you the best possible deal because the lender is not committed to that price until it is locked. This might take a few days, or a few weeks if the appraisal is delayed, which is the case right now in some states. Until the loan is locked, your price will float with the market. Unless you can monitor the price changes, you can't be sure of the integrity of the process. Monitoring allows you to verify that when your loan is finally locked, the price is identical to the price the lender is currently quoting on a new loan that is identical to yours. I have referred to this as the "twin sibling rule".
Decision Support: Many borrowers need help in making decisions about the type of mortgage, and the combination of upfront fees and interest rate that best meets their needs. All sites show the mortgage payment but what borrowers also should have is information on the impact of different options on their future wealth.
How does a shopper know which multi-lender sites have these desirable features and which ones don't? About three years ago, my colleague Jack Pritchard and I examined 14 sites, recording which of the desirable features each site had. We found that 10 of the 14 collected posted prices from lenders, but there was a large fall-off on the other features. The results were posted on my site.
We recently surveyed the same 14 sites in connection with this article, and the results were discouraging. Only 2 now obtain posted prices: Mortgage Marvel and Mortgage Professor (my site). The others are no longer true multi-lender sites. What they do is display lender names or logos, and users who click on a name go to that lender's web site. The only value this provides to the consumer is convenient access to a lender's web address. You can view the new results here.