Here’s my step-by-step guide to doing a mortgage for the best rate, mostly following what worked for me. I’m not a great negotiatior or anything of the sort. But, negotiating with lenders is extremely easy– they know they all compete mostly on price. Not only that, the sales commissions are often the same regardless of the price (until they start talking to their manager if your loan is big enough for them to split the commission with you). Moreover, small Internet lenders kind of play hot-potato with conforming ($<510,400 as of 2020) loans and know exactly what rate and fees they need to sell it to Fannie Mae/Freddie Mac (or just a big cash-rich bank) at a profit. They literally just punch your numbers into their loan software and generate offers off that. Jumbo loans are a different dynamic since Fannie and Freddie aren’t buying and packaging them. With these loans, you can get special “relationship discounts” if you bring over $250,000 or more to the lending bank. The idea being they hope you’ll switch primary banks and use their expensive services down the line. Generally that comes from national banks with lots of profitable non-banking service-lines (insurance, financial advising, etc) to offer you. Some banks don’t give relationship discounts for conforming loans, but it’s worth looking into either way.

In general, the bigger the balance, the more profit the originating bank makes, the better the terms (with a break around conforming/non-conforming). Obviously, I”m assuming you’re living within your means and not going to have any problems with your payments.

When talking to brokers, it helps to speak the lingo so they know you have some background knowledge. One way to do that is speak in “eights,” since mortgages are generally quoted in increments of eights. So, 2.875 is 1/8th better than 3.0 and 14 less than 3.125%. But don’t say 2 and 7/8ths to mean 2.875. That’s weird.

Step 1: Gather background documents and determine your credit score

Getting your credit score is easy, your bank probably offers it. Alternatively, creditkarma.com offers it for free.

Background documents you’ll generally need (pdf form is best): * 2 years of w2s or 1099/k1 income * Login/password to each of your banks (automated underwriting software will log in to your bank and get the details) * Scanned copy of you and your spouse’s drivers license.

Things you may need: * 2 years of taxes * Cash-balance bank accounts most recent statements * Brokerage and investing accounts most recent statements

Step 2: Find a bank offering a good rate. (Eventually you’ll get to a great rate)

I’ve found that zillow.com/refinance gives the best rates. They have a non-refinance version too. You can also try bankrate.com. Check at different times during the day. Contact the 2-3 banks with the best rates, upload the necessary documents and lock a rate as soon as you can. At the rate-lock point, you can start shopping around. Ideally you’d have a loan estimate, but anything in writing (like an e-mail) will do.

Step 3

Remember: You’ll be talking to loan salesmen. They know they’re selling a commodity and know you know they may never actually service the loan. They want to originate your loan, rush you through underwriting, sell your loan to somebody else and collect their commission all as quickly as they can.

Take your loan estimate to other lenders. E-mail it freely, you can redact parts if you want but I didn’t. Then take their quote back to the other lender. Ultimately you may get different terms (for instance a credit and a slightly higher rate to compare with a lower rate and a closing fee). I stopped negotiating after the brokers went to their manager to find a way to work things out.

For jumbo loans in particular (but also conforming loans), you should shop also shop the national banks at this point. You can find phone numbers to mortgage lenders at your local branch on the bank’s websites. Call them, be straight to the point that you’re about to sign and want to see if they can beat the terms. Let them know whatever assets you have that you can bring over for potential relationship discounts.

Step 4: Evaluating different terms

I shopped for 30-year fixed mortgages. My reason being 3ish% is incredibly low, so low that I’m comfortable kicking the can down the road as far as possible. That let’s me invest dollars today that are worth more than dollars I have to pay tomorrow at histroically low rates. But, your approach may be completely different. Figure out what’s important to you. For me, I did a net present value analysis and the answer was clear– an extra 1/8th% was worth several thousand dolars. There’s some risk in that rates could drop before the closing costs are paid for, so it’s not for everybody.

Also, you will see dropoffs in rates for 15-year terms or even ARMs. The process remains the same, but honestly the difference of 12% isn’t worth having to pay much sooner.

So, just figure out what you want.