Don't rely on lead generation sites for accurate interest rate and loan fee combinations
Furthermore, mortgage price quotes are not binding on the lender until they are locked, which encourages some lenders to "lowball," or quote a mortgage price below the price the lender has any intention of delivering.
If a price-shopping consumer is a lead purchased from an LGS, the lender knows that the price quoted will be compared to the quotes of two or three other lenders. This makes the temptation to lowball very strong.
While brokers may also lowball, UMBs by design may not. UMBs are committed to negotiating their own fee in advance with the borrower, which means that they have nothing to gain by pretending that the lender price is lower than its actual price.
Shopping Upfront Mortgage Lenders (UMLs), which similarly practice consumer transparency, is another good alternative to using LGSs, but only for borrowers who are prepared to do the extra work involved. Instead of being solicited by lenders selected by the LGS, the borrower shops among seven lenders who post complete prices on their websites.
Their commitment to complete pricing and anonymous shopping by users is part of the UML certification. Borrowers have an easier time comparing prices of different lenders when all the lenders show all the interest rate and fee combinations that they offer. And UMLs cannot lowball because their real prices are always on display.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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