For a brighter future, focus on numbers – Part 2 (3-min read)

In my previous post, I explained why and how I decided that instead of worrying about the daily mayhem of COVID-19, my time was better spent positioning for the future by maximizing the opportunities that arise in the uncertain times.  Specifically, I took advantage of the falling interest rates and focused on refinancing our mortgage.  Now, I share with you a few interesting discoveries during the refi process, should you choose to try the same:

By the end of the first day of loan shopping, I had one good faith loan estimate in my hand.  It came from Brian at the First Internet Bank.  It outlined all the important details of the offer, such as the proposed interest rate, loan amount, lender credits, overall APR, etc.  It also showed all negotiable and non-negotiable closing costs.

Work with each lender to give you a good faith loan estimate. When you get at least two, the negotiation fun can start!

The first version of the loan estimate offered an interest rate of 3.375%, lender credit of ~$3.5K and closing costs estimated at $6K-$8K, depending on the escrow and the closing date.  The closing costs were higher than my husband and I wanted to pay, and the interest rate was a bit higher than I anticipated.  I informed Brian that this was not exactly what I was expecting and mentioned that I would be shopping around a bit.

Brian understood and also explained that lender credits vary by day and are affected by the “size of the loan pipeline.”  This means, the more loans the bank has to close in the upcoming 30 days, the less incentive they have to earn your business, so the lender credits get smaller.  This “pipeline” seems to clear at the beginning of the week, so it seems to be more advantageous to negotiate and lock in rates with lenders early in the week.

Brian also left each of our conversations with the same message: “Please share the other lenders’ quotes with me, and I will attempt to beat them and earn your business.”  Thus, in order to get the best deal, I needed to get a competing offer from at least one additional lender.  This proved to be easier said than done.

When you have at least two loan estimates, it is easier to compare “apples to apples,” and lenders are more willing to compete for your business.  They, too, need the proof in order to ask for pricing exceptions from their management.  It is, however, a balancing game.  Loan estimates take time to put together and not everyone is willing to do them unless there is a firm-ish commitment that you will chose their offer over others.  On the other hand, how can you say that you will chose their offer unless you really know the details.  See what I mean?

The process of obtaining an additional loan estimate took a couple of days and it taught me the following:

  • Many lenders will summarize their offer in an email, but not want to provide a good faith loan estimate right away.  Thus, they leave out important details and give themselves more wiggle room to negotiate the costs up.  Once they issue the loan estimate, they are very much tied to the costs they provide.  So, do the best you can to persuade each lender to send you their loan estimate soonest.
  • I even had one lender representative from, ask me line by line what was in the First Bank’s loan estimate.  After that, they confirmed the offer I received from Brian was solid and all they could do is just beat it by $200 to win my business.  By that point, I invested enough time in building my relationship with Brian, and it was not worth it to me to do it all over again with someone else for $200.  So, I went with my gut, thanked them for their time and moved on.  Know when to move on – your time is of value! 

Read the surprising findings and the conclusion of my refi effort in my next post.

Sagely yours,

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