Introducing the Quick Mortgage Shopper (QMS)
August 30, 2018
Over the years, the topic that has attracted the
largest number of readers on my site is shopping for a
mortgage. I just counted 70 articles on the subject, going
back to the year 2000. There are many articles because
shopping is a multi-stage process, with complexities and
challenges arising at each stage. The multi-lender shopping
facility on my site is designed to guide shoppers through
the entire process.
This article describes a quicker and simpler
approach to mortgage shopping that was recently implemented
Quick Mortgage Shopper or QMS. It has emerged late in
the development of my approach to mortgage shopping because
one must know all the hazards of the main road before
finding a safe short cut.
Though not for everyone, those
who can use QMS will shop as effectively as those who go
through the longer process, and spend much less time doing
QMS skips 3 steps in the shopping
Determining whether the shopper qualifies – QMS assumes that she does.
Determining the preferred type of mortgage – the user must know the type of mortgage she wants beforehand. QMS requires the shopper to select a 30 or 15-year FRM, or a 5/1, 7/1 or 10/1 ARM.
Determining the preferred combination of interest rate and lender points – QMS assumes the borrower wants the lowest interest rate at zero points and other fees. The borrower who wants to buy down the interest rate by paying points, and the borrower who needs a rebate from the lender to meet cash needs, should not use QMS. Another name for QMS is “Rate Shopper”.
Rate For Transaction Features
The core feature of QMS is the
calculation of a competitive rate that is unique to the
shopper based on the features of the shopper’s transaction
that affect the rate. These features are the loan purpose,
purchase price or property value, down payment, loan amount,
property zip code, FICO score, type of property, type of
occupancy, lock period, and escrow waiver.
The shopper’s information is used
to derive a no-fee interest rate from each of the lenders
who deliver prices to my web site, and the lowest of those
rates is reported to the shopper. The shopping rate is thus
a competitive rate that the shopper can use to shop anywhere
– but not anytime.
Since rates are reset every
morning, shoppers who use the QMS to shop should refresh it
every day, even after selecting a lender, until the lender
selected locks the loan rate.
the CFPB Shopping Guide
To my knowledge, the only other
mortgage-shopping guide is the “Explore Interest Rates” tool
provided by the Consumer Financial Protection Bureau (CFPB).
Instead of a shopping rate that a competing lender should
match or better, CFPB shows a distribution of rates, and
leaves it to the shopper to decide which rate in the
distribution is the lowest they can expect to find by
For example, given the loan
features I entered on August 21, CFPB told me that in
Pennsylvania where I live, rates ranged from 4.5% to 5.75%
with a clustering at 4.875%. Since there is no way to
determine the reasons for the differences, this is not much
help. Furthermore, where the rates posted on my site are
updated daily, in line with market practice, the CFPB rates
are updated on Wednesdays and Fridays only.
In sum, the CFPB rates might be useful to a visitor from Mars interested in knowing whether interest rates are closer to 5% than 50%, but for earth-bound shoppers they are useless.