Homeowners are lining up in droves to take advantage of historically low mortgage rates by refinancing their existing home loan or purchasing a new home.
The number of mortgages originated in 2020 is expected to be 50% higher than 2019, according to the Mortgage Bankers Association forecast. And even if the pace slows, it will still be much higher than in previous years.
But before you start shopping for a mortgage, there are a few things Shant Banosian, the top loan originator in U.S. for two years running, would like you to know about why mortgage rates aren’t the only thing to shop for, how to avoid delays in closing, and how to find the right lender for you.
Banosian, 40, has been one of the beneficiaries of this mortgage boom, closing an astounding $1.7 billion in loans in 2020. This puts him in a good position to take home the nation’s top loan originator title for a third straight year, when Scotsman Guide, a leading mortgage industry publication, releases its latest rankings in the coming weeks.
The Massachusetts-based Banosian has been working in the mortgage industry since 2003, and since 2012 has been a branch manager with the Chicago-headquartered mortgage lender Guaranteed Rate. Throughout his career, he estimates he’s closed on more than 15,000 loans worth well over $4 billion dollars in total. He now manages a growing team of 45 people, and recently became Guaranteed Rate’s first loan officer to hit the billion-dollar mark within a calendar year.
The following interview has been edited for clarity and brevity.
What’s the Most Important Thing for a Borrower to Pay Attention to When Shopping for a Mortgage?
Most of my clients are really, really hung up on the interest rate. When most people call me the first question they ask is, ‘what’s your rate?’ It’s a fair question. That’s what you’re programmed to ask, because it’s all everybody advertises.
Most clients are unaware about closing costs and how they can differ from lender to lender. So you have to do an equal comparison, not just on rate, but also on closing costs. There are a lot of lenders out there that will give you a decent rate, but then just completely vary with closing costs and discount points.
It’s not just about the interest rate, you have to marry the interest rate, closing costs, and execution. There are a lot of lenders I’ve heard making all sorts of promises committing to certain rate locks, but they’re never funding the loan. They may be overwhelmed or don’t have the capacity or the experience to work in a market like this. A rate lock doesn’t do anything for you if the loan isn’t closed. So there are a lot of factors, but comparing both rates and closing costs, apples to apples, is the first thing.
What Do People Often Overlook When Shopping for a Mortgage?
A lot of people hold off on getting preapproved because they don’t want to have their credit run. They’re under the impression that getting your credit pulled for a preapproval can have a drastic negative impact on your credit score. So a lot of people hold off on getting preapproved until the very last minute, or sometimes when it’s too late.
The problem is that inventory is so low and demand is so high that competition is fierce. Over 50% of new listings in 2020 were in some sort of bidding war. If you’re waiting to get preapproved, or getting preapproved without a credit check, you’re not properly prepared.
I think getting your credit pulled as a part of the mortgage preapproval process early is super valuable. You get properly vetted to find out what your home buying budget is, and what loan programs you may qualify for. But you can also see if there’s anything you can fix on your credit report, which could be very valuable to you. Improving your credit score could get you a much better rate or even help you qualify for the loan. There are a lot of myths out there about how negative the credit pull is, but I think there are a lot of benefits that go with it.
What Can Borrowers Do to Avoid Delays in Closing?
Have a really clear understanding of what the timeline is, what documents the lender requires, and what their responsibilities are as a borrower. Clearly understanding what your role and responsibility is.
Sometimes lenders will just assume the client understands deadlines, and timelines, and their responsibility. But the reality is that for most borrowers, this might only be the first, second, or third time that they’ve ever gotten a mortgage. So they’re not experts.
I truly feel the lender should be setting very clear expectations of what everybody’s role is. The borrower can only control what they can control. So make sure you have a clear, defined understanding of what your roles are, what is needed from you, when it’s needed from you, and in what format. Get that in writing so you can make sure you’re doing your part.
When Someone’s Looking for a Loan Officer, What Questions Should They Ask?
I would ask: How long have you been doing this? How many transactions have you closed in your career? Ask if they have experience with the types of loan they are recommending for you.
The good thing about the internet is that you can find so much information. I would check them out on places like LinkedIn, Google, Zillow, and Facebook — any place where people can share helpful reviews. It’s really important to do your homework on whomever you’re working with.
What Do You See Happening With Mortgage Rates?
I think we’ve already seen the lowest of the lows. We’ve already bounced off the all-time lows, but they’re still amazing. I think we’ll hover between high twos and mid-threes all year.
We’ll see bounces up and down as there’s talks of inflation, stimulus bills, and the vaccine. I think there’ll be some volatility. But I think historically speaking, mortgage rates will remain amazing.
That really helps affordability and also creates a massive opportunity for refinances. A lot of consumers that already own homes are taking advantage. They’re using that as an opportunity to lower payments or to take cash out to consolidate debt or make home improvements. In a lot of cases, people are shortening their terms to pay off the mortgage earlier.
This rate environment is extraordinary. I think we’ll be able to take advantage of it for at least another year, and maybe a year after that. We’ll be in a low-rate environment for a while because a pandemic that nobody planned for is going to take a lot longer for the Federal Reserve to unwind than just 12 or 18 months.