Version #2

Conversation with a prospect explaining how rates work and the difference between a rate quote with and without the loan application.

Prospect: "Ryan, I'm just calling you. I'm looking to buy a home. I'm just trying to research different lenders. Can you tell me what's your rate?"

You: "Well, Mr. Smith, that's a great question. Right now, interest rates are ranging probably anywhere from the low 5% range all the way up to the 9% range. Are you familiar with what's happening in the mortgage industry and how interest rates have been fluctuating lately?"

Prospect: "Kind of. I know rates have gone up."

You: "Okay. Well, do you mind if I ask, have you gone through this process before? Have you been pre-approved? Or, I guess most importantly, do you know how mortgage rates work and how they work from different lender to different lender?" "Well, no, not really. Again, I'm just trying to figure out who's got good or low-interest rates." "Okay. Do you mind if I help you understand because I think if you're really searching for the lowest interest rate, I want to talk to you about the positives and negatives of that strategy." Are you okay with me just kind of helping you understand how mortgage interest rates work?"

Prospect: "Yeah, that'd be great."

You: "Okay. Well, mortgage interest rates are set by what's called mortgage-backed securities, and those are traded actually on Wall Street. And they move every day very closely in relation to the 10-year Treasury bond. So you legitimately could call 10 lenders today and 10 lenders tomorrow, the same 10 lenders, and you'll get 10 different answers. So, unfortunately, there's no real way to find who has the quote/unquote "lowest" interest rate. Now, you can say, 'Well, here's my situation, here's my scenario. I'm going to put X amount of dollars down. Here's my credit score,' because there's about 23 different things that I would need to know about you in order to accurately quote you an interest rate. So, have you called other lenders, and they've given you an interest rate?"

Prospect: "Yeah, quite a few."

You: "Okay. Well, just kind of a cautionary tale here: most of those lenders, unless they've asked you those 23 questions, they're just trying to sell you on the lowest rate possible to hook you in, and then they will maneuver that interest rate later based upon where your actual situation lands. I don't feel comfortable doing that. I feel like it would be irresponsible of me, and as a fiduciary, I want to give you the exact right numbers. Now, are you familiar with how discount points work and how you can kind of manage your cost versus your interest rate?"

Prospect: "No, I'm not really aware of that."

You: "Okay. Well, for example, you can go and look on a website, and they'll have an interest rate posted, and in the fine print, they might

have, well, this rate comes with two points, and it comes with 40% down, and it comes with an 800 credit score and so on and so forth. But no one ever pays attention to the fine print. They just look at the interest rate, and that's the hook for most mortgage lenders. The reason why you're likely calling us, either you saw reviews, or you referred to us, is because we give clients the best interest rate for them, their situation today, but most importantly, for their situation over the next 6, 12 months, and years ahead, because that's the important part of this. What I would tell you, Mr. Smith, is that the interest rate you take today, you will almost certainly not have for very long. And so how you structure the cost in relation to your interest rate is going to be actually more important than the interest rate you pay in the interim.

“Now, I know this is a lot of information, and it might be a little overwhelming, but I would encourage you to just, let's go through our process. I can ask some questions, and then in our consultation, I can get very detailed around what interest rate is appropriate for you and why. And then you'll have all the information you need, and then you can really start asking and answering these questions in a more educated way. And I think you deserve that because if you just keep calling people, asking for interest rates, you're going to get a lot of salespeople and, unfortunately not a lot of consultative advice. So are you okay having us start this process and then we can learn as we go?"

Prospect’s realization at the end of the conversation: "Okay, there's a lot I don't know about this. Asking what's your rate to a bunch of different lenders is essentially not a good strategy because I've just learned that it doesn't make sense, and this guy has taught me something that no other lender has taken the time to do. So I'm going to stick with him a bit longer to really understand what's happening."