How Do You Handle Unrealistic Expectations About Mortgage Rates?
Navigating the choppy waters of mortgage expectations, we sought the expertise of mortgage professionals to shed light on this common challenge. From clarifying total loan costs to educating clients on their financial profile, here are five valuable strategies shared by CEOs, brokers, and advisors on managing unrealistic expectations in the mortgage process.
- Clarify Total Loan Costs
- Start with Comfortable Payments
- Present Multiple Loan Scenarios
- Discuss Pre-Comfort Level
- Educate on Financial Profile
Clarify Total Loan Costs
As the CEO of LBC Mortgage with over 20 years in the industry, I've often had to help clients adjust their expectations about loan amounts or rates. One thing I see a lot is clients fixated on getting the lowest interest rate, thinking it's the cheapest option.
When this happens, I sit down with them and do the math together. I show them how other factors like loan terms, fees, and closing costs can make a big difference. For instance, a loan with a slightly higher interest rate but lower fees might actually be cheaper in the long run than one with a super-low rate but high fees.
I remember one client who was dead-set on the lowest rate they saw advertised. We went through a side-by-side comparison of two loan offers, and I explained the total cost over the life of the loan. When they saw that the "cheaper" option was actually more expensive due to hidden fees, they were both surprised and grateful.
Clients are often amazed when they see the full picture, and they appreciate the clarity. It's so rewarding to help them make informed decisions that really work for them.
Start with Comfortable Payments
I often encounter clients who have unrealistic expectations about what their mortgage payments will be in the current rate environment. To navigate this, I start by asking clients how much they feel comfortable spending each month, then work backward from there, rather than beginning with the amount of mortgage they want to obtain. I've found that there is often a disconnect between the payment required to service a mortgage at a certain level and what clients expect. This approach helps manage their expectations more effectively.
Present Multiple Loan Scenarios
When dealing with a client's unrealistic expectations about loan amounts or rates, I find it helpful to provide multiple quotes and options. By presenting different scenarios, I can illustrate the full range of what's available in the current market. This approach helps clients see the broader lending landscape and understand how factors like credit scores, down payments, and market conditions influence their options. With this clearer picture, clients are often more willing to adjust their expectations, making for a smoother, more informed decision-making process. It's all about guiding them with the right information so they can make the best choice.
Discuss Pre-Comfort Level
During the consultation, I discuss not their pre-approval level, but their pre-comfort level. We do a complete breakdown of what their budget looks like, and how obtaining a mortgage will affect their budget month in and month out. What type of life do they want to live, how much will they be saving each month, when are they looking to retire? Based on some of these questions and more, we can then discuss how we can cater their pre-comfort level into reality, and see what can be shifted in their overall budget. When discussions revolve around borrowing hundreds of thousands of dollars, every stone has to be turned over!
Educate on Financial Profile
I had a client not too long ago who came in with expectations that were, frankly, a bit out of sync with market reality. They were hoping for a loan amount that far exceeded what their financials would support, along with an interest rate that was well below the market average. It's a common scenario—people often see headlines about low rates or hear success stories and assume it applies universally.
When this happens, my approach is always to be transparent and educational. I sat down with the client and walked them through their financial profile, showing them exactly how lenders would view their situation. I broke down the factors that go into determining loan amounts and interest rates, like credit history, income, and existing debt. By the end of our conversation, they had a much clearer understanding of what was realistic and why their initial expectations were off the mark.
The key here is to listen first and then guide them through the facts, so they feel informed rather than dismissed. This particular client appreciated the clarity and ended up adjusting their goals to something more achievable, which led to a successful loan approval that they were genuinely happy with.
