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Rates are low, but better home loans are still out there

LOS ANGELES — The latest frenzy of mortgage refinancings has benefited millions of Americans who have been responsible or lucky enough to qualify for 30-year fixed-rate home loans below 4 percent.

Home lending professionals have some bad news, though, for many of these homeowners: They could have done much better had they shopped for the best rate instead of grabbing the first refi pitched to them.

Quoted rates can vary by more than a percentage point for the same customer seeking a 30-year fixed loan, according to LendingTree. The online mortgage shopping service provides information about potential borrowers to lenders who then can bid for the business.

A consumer with a credit score of 759 and a loan amount of $260,000, for example, might have received quotes from lenders in early August ranging from 3.25 percent to 4.625 percent. By choosing the lowest rate, the borrower would save $214 a month, $2,568 a year and nearly $74,000 over the life of the loan.

Yet a recent Harris Interactive survey of 1,380 homeowners, conducted for LendingTree, found that 9 in 10 American adults compared prices when shopping for big purchases. But fewer than half of homeowners shopped around to refinance their current mortgages.

LendingTree Chief Executive Doug Lebda advised borrowers to negotiate with lenders and be prepared to walk away if a deal seems lackluster — even though the mortgage process can seem daunting and complex.

"Consumers need to be engaged," Lebda said. "A lot of them are just happy to have it over with rather than hang in there to get the best deal."

While providing access to multiple lenders, online sites like LendingTree have drawn mixed reviews. Some borrowers complain of being bombarded with high-pressure pitches for nothing-special rates or loan products that they didn't ask for and don't want.

Lebda said lenders using his service are free to pitch products other than those the borrowers are seeking. Someone seeking a 30-year fixed loan, for example, might be offered a loan with a lower initial rate that can rise after five or seven years. That's fine if you're sure you'll move before the day of reckoning arrives, he said, but it's better to compare loans of similar types to get a clear idea of the best deal.

Jeff Blyskal, a senior editor at Consumer Reports, advised borrowers to talk to several banks, savings and loans and credit unions to gauge rates and terms. "Our whole thing is shop everywhere you can," he said.

He said borrowers should then consider consulting a mortgage broker who has access to multiple lenders, perhaps consulting the National Association of Mortgage Brokers to find a certified professional.

Don't rule out small local banks, some of which are eager to make mortgage loans, Blyskal said. "They may get to know you better, so you're not just a number and a credit score," he said. "You may fit what they're looking for."

Lending standards remain tight as a drum and pose challenges for all but the most rock-solid borrowers, he said.

What customers leave on the table enhances the profits of lenders, who have enjoyed soaring revenue and profits since the typical 30-year fixed mortgage rate dipped below 4 percent last fall and then trended downward to the 3.5 percent range this summer.

Rates are low, but better home loans are still out there 09/14/12 [Last modified: Friday, September 14, 2012 10:26pm]
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