3 Components for the "Best" Mortgage

Finding the "best" mortgage really comes down to the issues of expertise, convenience, and price.

“Everyone who is shopping for a mortgage wants the best expert, convenience, and the lowest price,” says Drew Sygit, a Michigan-based Mortgage Banker for Lending Edge, “But they are setting themselves up if they expect to get all three. It’s impossible.”

There is no cookie cutter formula for the “best” mortgage. There is a different “best” mortgage that each consumer can find for him or herself. Unfortunately, most people are going about that search incorrectly.

Why are they going about that search incorrectly? According to Sygit, “They aren’t keeping the end in mind. They have to figure out what they are trying to accomplish and work back from that.”

The formula for the “best” loan really comes down to three components:
Expertise: how much expertise is a consumer’s situation going to require?
Convenience: how important is convenience and is the tradeoff worth it?
Price: how important is price and how realistic is it to fight for a lower price?
The real challenge is how a consumer is going to balance all three components. And consumers should understand that there is a tradeoff depending on what their goals are:
Are you more of a novice with less than stellar finances? Then, it’s likely that you will benefit from more expertise, which does not come cheap.
Do you have a lot of mortgage knowledge and clean finances? Then you can likely forgo the expertise and use the convenient option of looking around online for the best deals.
Do you want the absolute best price available? You may have to do a lot of your own legwork and forgo both convenience and expertise.
Here is a rundown of the three components:
Expertise
“Of course, if you are Mr. Gold Plated Standard with the Titanium Card and everything is perfect and you’re putting 20% down, then you can nickel and dime the industry to death and try to find the price that you want,” says Sygit. “If you’re not Mr. Gold Plated Standard, though, you need somebody who is an expert and experts always cost more.”

To find the right lender or broker, it’s all basically going to boil down to referrals. “When you talk to friends and family,” says Sygit, “Don’t just ask, “who do you recommend?” You have to go deeper and ask,” What was your situation?” If your brother gives you a recommendation but he’s gold plated standard and you’re not, that referral may not work for you.”

Convenience
These days, you can apply to for your loan online, fax everything in, and never have to leave your house for any face-to-face time.

“Typically, there is going to be a little less service if you go this route,” says Sygit, “But that’s just the nature of the game. Typically, it should be cheaper because you are dealing with less experienced people who cost less. That segment of the industry is built that way. To be cost efficient, you’re probably going to be talking to somebody with less than five years of experience—probably less than two.”

Price
Price is usually the biggest component for most homebuyers. “The industry is a lot more rigid now than anytime in the past ten years when it comes to price,” says Sygit. “There’s less flexibility at the loan officer or salesperson level. With all this government meddling, fees have gone up for the consumer. Loans are more expensive now than they were because of all of the addition safety-guards that the government is putting forth.”

Overall, it’s tougher to chop fees off of a loan today. Even if a broker gets repeat clients, it’s still difficult to cut costs and give them a break.

“The important thing is to understand is the fees,” says Sygit,”There are a lot of companies that out there that are gouging. It’s really important to understand those fees because then you can understand when you’re getting taken advantage of.”
In general, though, if you want the lowest price, you have to go in with solid finances and a good understanding of the whole process. Overall, that’s the safest way to get a good price.

If you are looking for the “best” loan, think about the three components of Expertise, Convenience, and Price to figure out what is an important end goal. Then, work back from there to figure out the most efficient way to search for the “best” loan for you.