Advice to mortgage borrowers: Shop hard for the best deal

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Phil Shoemaker has one bit of advice for mortgage borrowers: Do plenty of comparison shopping before you sign on the bottom line.

Shoemaker is president of originations at Homepoint, and his advice echoes the conventional wisdom in the mortgage industry, namely that comparing at least three mortgage offers can save you thousands of dollars over the life of the loan.

Homepoint is a Michigan-based mortgage originator that works with a nationwide network of thousands of mortgage brokers. Shoemaker spoke with Bankrate about the housing market and mortgage rates.

What’s the biggest mistake you see borrowers make?

Shoemaker: Not shopping your rate. Make sure you shop your mortgage rate. We track the difference in rates that consumers get between going through a broker and going through retail lenders, and there’s a pretty good spread. We find that borrowers can get anywhere from an eighth to three-eighths of a point better on the rate by using a broker. The reality is that lenders are forced to compete to win the broker’s business. It forces the lender to be as competitive as they can be. Going through a mortgage broker is the best way to make sure you get the best rate possible. Brokers have the ability to go to multiple lenders and they can make sure you get the best combination of rate, product, price and service. I may be biased, but I just feel brokers are going to give borrowers a better rate.

Where do you see rates heading this year?

Shoemaker: Rates are still really low. Fannie Mae, Freddie Mac and the Mortgage Bankers Association are all expecting rates to go up, and that’s supported by the facts. You can’t dump $6 trillion into the economy and not expect inflation to start to kick in. At some point, we’re going to see a continued acceleration of inflation. And it will trigger, at some point, the Federal Reserve to taper their buying program, and rates will come up. The problem is how do you square that with continued affordability issues? The bottom line is rates are more likely to go up than go down.

What advice do you give to a buyer who’s trying to navigate this market?

Shoemaker: Just like anything in life, it’s really easy to get over your skis, especially in a market like this. Figure out what you can comfortably afford, and set a budget. Despite the heat in the market, stick to your budget. Be patient, and be methodical. You want to buy a home now, but in some cases, you might need to wait a little bit. Pricing is going up, so you have to be very thoughtful about what you can afford. It’s a very competitive market, but don’t stretch yourself beyond what you can comfortably afford.

Given the pace at which prices are rising, it seems hard not to stretch.

Shoemaker: Absolutely. Prices are at record levels, and they continue to rise month over month. There’s a lot of talk about this in the industry — is this a bubble? Even though it may feel like a bubble, I don’t see it as being a bubble. In 2007, you had an imbalance between supply and demand, because the industry itself was creating demand. People were getting qualified for loans that they had no business getting. Today, people have all-time record high savings. It’s truly a supply-side issue. So I don’t think it’s a bubble. If prices come down, I don’t think it’s going to be at a meaningful level. I still think if you can buy a home, you should buy a home.

President Joe Biden promised a credit for first-time homebuyers. Is now the right time to bring even more buyers into the market?

Shoemaker: I have mixed feelings. On the one hand, given where prices are going, it’s helpful to give support to first-time homebuyers. The No. 1 way people build wealth in this country is owning a home. So I think it’s a good thing, and I’m very much supportive of it. But I do worry about the timing. You’re going to dump more qualified people on the demand side when you’ve got a supply problem.

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Written by
Jeff Ostrowski
Senior mortgage reporter
Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
Edited by
Senior mortgage editor
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