The Critical 7 Questions to Ask When Shopping for a Mortgage.


You know that getting a lower rate means a lower mortgage payment. This is true regardless of whether you are buying a house or refinancing. But where do you begin? Do you apply online and in turn have your information sold to multiple, probably pushy salespeople? Do you contact your bank, hoping to get a break since you have money stored there? What about the constant letters, emails, and advertising banners from your current mortgage servicer? We answer this question by comparing who has better mortgage rates.

Regardless of the type of lender you are working with, there are 7 critical questions will give you an edge in negotiating your next mortgage. Before we get to the questions, you should know how banks, direct lenders and brokers make money.

How Banks Make Money

Banks and credit unions make money on the interest rate they give you. They make money by either servicing your mortgage or selling it on the secondary market. The amount of SRP paid is based on the value of the note when it is sold off. Banks usually lend their own money and operate at a high overhead. It’s expensive to staff top earning underwriters and funders. Therefore, It’s in a banks personal interest to give you the highest rate possible to make a profit.

How Direct Lenders Make Money

A direct lender or lender also makes money on the interest rate sold to the consumer. While some more prominent direct lenders service their mortgages, most medium-sized, and smaller lenders sell mortgages as soon as closing on the secondary market. You see, lenders have an expensive line of credit which they use to fund loans. By borrowing money for a short-term from a bank or a private institution. You can expect higher rates from a direct lender because of the cost to operate lines of credit along with the high overhead required to act as a direct lender. They too make a large profit by selling you a higher rate.

How Brokers Make Money

Brokers make money by pairing your mortgage with a wholesale lending partner. Brokers set compensation with each wholesale lending partner, approved every quarter, and may not deviate from this set amount. Brokers usually do not have a line of credit or employ high salary underwriters and funders. Instead, the wholesale lender will underwrite and fund your home loan. As a result, most brokers may operate with very little overhead fees. Not all brokers pass along the savings; we do. We designed Candor Mortgage to run very efficiently using the latest technology. We do not pay our people commission because we want them concentrating on your needs, not their wallets. We are compensated by our wholesale lending partners. 

Key Factors that Will Affect Your Mortgage Pricing

There are a few things you should know before contacting any company and getting a rate quote or getting pre-qualified to buy a home. The first thing is your credit score. Your credit score is one of the main factors that will impact your interest rate or closing costs. Credit scores range from 300 to 850. A credit score over 740 will usually qualify you for the best mortgage pricing. It’s important to know that while you may get a bank’s best pricing, it could still be higher than what a broker like Candor Mortgage may offer.

You should also know how much you can expect your home to appraise. You’ve probably received flyers from realtors listing how much your neighbors are selling their homes for. Those are usually a pretty good indicator of your home’s value if your home is of comparable quality. You should also check that against online search tools, like Zillow; we can also send you your home’s estimated value. We don’t need to pull your credit or make a loan application to do this.

Learn to Talk Like an Insider with some Industry Jargon 

Knowing industry terminology will help you when shopping for a mortgage because it shows that you are savvier than the typical borrower. Understand these terms for better shopping experience:

  • Par Rate: The par rate is the interest rate a borrower may qualify for without any markup or interest rate manipulation. In other words, it’s a rate without paying any points nor yielding much lender credit.
  • Loan-to-Value (LTV): The LTV is a term often used to describe the ratio of a loan to the value of your home. For example, if your home is worth $600,000 and you are getting a new mortgage for $300,00, your LTV is 50%. LTV = Home Value/Mortgage. If your LTV is at or below 60%, you can expect better mortgage pricing.
  • Lender Credit: When you select an interest rate above par, you may receive a credit which will be used to offset closing costs. You accept a little higher price in exchange for less closing costs.
  • Discount Point (points): A point is an amount you pay as a tradeoff between higher closing costs and interest rate or mortgage payment. Usually, a point is 1% of your loan amount, but they may not always be round numbers.
  • SRP: After a mortgage closes, it may be sold on the secondary market. A service release premium (SRP) is compensation received by a bank or lender on the sale of a closed mortgage loan.
  • YSP: A Yield Spread Premium is similar to SRP. It is compensation received by a broker for selling an interest rate above par. In 2010, President Obama passed the Dodd-Frank as an answer to the 2008 housing crisis. The act made YSP illegal.
  • FNMA MBS: We mention Fannie Mae (FNMA) Mortgage-Backed Security (MBS) because it is a way for you to see and actively track interest rates movement visually.

7 Questions for Getting an Accurate Loan Estimate

  1. What is your best par interest rate you can offer with no points or lender fees?
    While this seems like a fundamental question to ask, you will be surprised how many responses you will receive, most of which will be indirect. Par is the rate a mortgage loan originator is offering without any markup or discount. By getting the par rate from company to company, this will allow you to compare mortgage offers accurately.
  2. What lender, appraisal, title, escrow, notary, and 3rd party fees do you charge? I would like to know the total closing costs.
    If you are shopping lender types, you will discover that lender fees, appraisal, title, escrow and 3rd party fees will vary from company to company. By comparing the par rate with the total cost to obtain a mortgage, you are well on your way to comparing and getting your best mortgage offers.
  3. Do you charge a fee or deposit to lock and when may I secure my lock?
    This may seem like something minor, but it’s very important. Here is why. A company charges a lock fee (often non-refundable) to ensure you will move forward with them regardless if you find a lower rate. A common practice with some companies is not locking a loan until the appraisal is received. From the initial conversation, this could be as much as 10 days where a borrower is at risk against the market. At Candor Mortgage, we do not charge any lock deposit fees and rely on our service and pricing to earn and retain your business.
  4. Are there any mortgage discounts or promotions I may be eligible for?
    Affordable lending programs like Fannie Mae HomeReady and FreddieMac HomePossible are not only for first-time homebuyers. If a lender is not knowledgeable or doesn’t have a system in place to check, you may miss out on possible additional savings.
  5. Can I get an estimate in writing?
    If you have followed steps 1 to 4 so far, you should have a legitimate rate quote. It’s time to get your loan estimate in writing. Make sure you request all the rate options you discussed in writing along with any associated closing costs and lender credits.
  6. How quickly can you close my loan?
    Asking the lender “How quickly are you able to close my mortgage?” is hugely important because closing quickly indicates competence. Plus, who wants to deal with a mortgage application for more than a few weeks? We often close or are ready to settle in 11 days at Candor Mortgage to give you an idea.
  7. Do you have a price match guarantee?
    We include this because we see this as a new trend which is alarming. A price match guarantee is usually nothing more than a sales tactic designed to build confidence in a particular company by making you think you have a safety net. If you read the fine print, nothing could be farther from the truth. We at Candor Mortgage choose not to have this type of guarantee because we do not need to. We are giving you our best loan offer upfront without holding back or trying to trick you into thinking you are getting a better mortgage than you are.

Good job reading this article and if you follow these steps, you will be able to make an apples-to-apples loan estimate comparison. Getting and knowing the numbers upfront without high-pressure sales or bait-and-switch tactics will help you choose the right mortgage.

The Critical First Step in Buying a House

do-this-first text and house

You may be shopping for a house but did you remember to shop for a mortgage? According to the Consumer Financial Protection Bureau, “nearly half of borrowers do not shop for a mortgage…”¹ As a result, these borrowers got either a higher rate or paid more in closing costs. This is why we recommend shopping for a mortgage before you start looking for a house. Finding the right mortgage can be complicated. As with any other major purchase, you’ll want to shop around before making a decision. Choosing the right mortgage begins with choosing the right lending company and asking the right questions. However, what do you need to know to start shopping for a bank, mortgage broker or lender?

Here at Candor Mortgage, we’re here to help you discover what loan is best for you by asking the right kinds of questions, listening to your needs, understanding your goals and giving you the best advice. While other companies practice pushy sales, we practice candor. It probably helps that we designed our mortgages with competitive pricing, costing less and requiring less paperwork. We are confident Candor Mortgage is the best home loan broker, we’re telling you not only how to shop but how to get the best mortgage anywhere.

What Are Your Needs?

The first step is to sit down, assess your spending and make a budget for the new house payment. Then ask these questions: What are my needs? How much do I want to spend on a new home? How much do I have saved for a down payment and closing costs? Is this the right time to buy? Am I looking to buy a home for long-term investment purposes, or will this become my primary residence? If you are buying with someone else, talk it over. These and similar questions will help you develop a better understanding of what direction you want to go in. With these questions in mind, you’ll be better prepared to purchase a mortgage that’s right for you.

When you work with Candor Mortgage, you won’t be forced to answer these questions alone. Through our unique approval process, we’ll help you step-by-step in explaining these and other vital matters.

Do you know your credit score?

After you assess your needs, it’s time to check your credit. There are three major credit reporting companies: Equifax, Experian, and TransUnion. You may get a free credit report from all three companies at It’s an excellent place to start if you haven’t looked at your credit in awhile. You may use these reports to check for errors carefully. If you want to know your actual credit scores or FICO scores, you will have to pay. If you do check your scores, you will want to check all three scores. Your scores will likely differ between the three credit bureaus. For lending purposes, most lenders will use the middle score.

Instead of going at it alone, we can help you obtain your credit report with all three credit scores. Then we will review it with you checking for any errors or misreporting. We can even help you make corrections which will often improve your FICO scores. Credit scores range from 300 to 850. It’s important to know your credit score because the interest rates you will be offered will depend on your credit score. Borrowers with a credit score above 740, typically get the best interest rate options. Want to know your credit score?

How much money do I need for a down payment?

One of the most significant costs to weigh when shopping for a mortgage is the down payment. This principal payment is typically referred to as having to be 20%, but this is not true. A down payment can range from 3% to 20% or more. While a lower down payment may come with higher interest rates, this is not always the case. Loan options like those offered by the FHA or VA provide home buyers with a flexible way of buying a home. There are also affordable home financing programs like Fannie Mae’s HomeReady, which we feel is a better option than FHA loans for creditworthy borrowers. Here at Candor Mortgage, we are constantly on the lookout for the best ways to save you money.

If you are able, it is also important to note that it can pay off to put more than 20% down, not only to lower your interest rate as previously mentioned but also to signal to lenders that you’re more than capable of paying back the mortgage loan. Further, most sellers prefer a higher down payment. Don’t forget to budget for closing costs as well when figuring out your down payment amount. Our verified pre-approval will help determine what amount your down payment should be and where in your finances it should come from.

How can I get the best or lowest interest rate?

Another and significant factor when shopping for a mortgage will be interest rates. You’ll have to think about interest rates not only when deciding what loan schedule is best for you, but also when it comes time to consider other aspects of your mortgage, such as how much to pay as a down payment. While the market dictates the overall trend for interest rates (go up and down), this is what you can do to get the best rate options.

The first factor needed is for your credit score to be above 740. Having your credit checked early in the buying process is our top recommendation. At Candor Mortgage, we often help buyers improve their credit scores by reaching out to the three bureaus to correct any false information. The second factor that will enhance your mortgage pricing is putting more money down or qualifying for an affordable mortgage product. Putting more money down makes your mortgage less risky, and lenders often reward you by giving you a better rate. An affordable mortgage like Fannie Mae’s HomeReady usually has a better interest rate and lower private mortgage insurance, both of which will give you a lower mortgage payment. The third factor is choosing the right mortgage lending company.

There are three types of mortgage companies: 1) banks or credit unions, 2) lender or direct lender, 3) mortgage brokers. As we discussed in a previous article, traditional banks and credit unions tend to be much slower and have higher rates and costs. The person you talk to at the bank often is not the one working on your mortgage. Banks make money by charging fees and higher interest rates. Lenders and direct lenders, the second type, have one or multiple lines of credit they use to fund loans. The additional overhead and cost to operate as a direct lender are usually passed on to you. Just like banks, the person who enrolls you is often not the same person who is working on your loan. Direct lenders make money by charging higher rates, origination and lender fees. This type of company does not need to disclose certain fees and can make a big profit on the interest rate they give you. Therefore, it’s safe to say, most direct lenders will have higher rate pricing and costs. The third option is independent mortgage brokers. A mortgage broker like Candor Mortgage has access to multiple wholesale lenders without any of the overhead. Uniquely to us, we use web software to compare multiple wholesale lenders’ pricing. We use cost-saving technology to run efficiently, and this allows us to pass along any savings to you. The person with whom you speak is the same person working directly on your mortgage.

One more thing, if you are working with a real estate professional like a Realtor, there is a good chance they’ll recommend that you use their in-house or preferred lender. An in-house lender may or may not have an ownership affiliation. In the end, you may choose to work with the company who is not only giving the best mortgage but more importantly who you feel has your back. At Candor Mortgage, we’re committed to providing accurate and transparent rate quotes that are helpful for you. Our rate quotes include all associated fees and costs. You’ll never run into any ‘bait-and-switch’ tactics with us.

How much will I pay in closing costs? What fees will I pay? 

Finding a way to lower your interest rates can certainly be beneficial, but it’s not the only way of saving money. Closing costs refer to the various fees that come with your mortgage, on top of its selling price. In California, the seller chooses the title and escrow company which will determine the majority of the loan fees. Some of these fees may include lender fees, appraisal fees, title insurance fees, owner’s title insurance fee, escrow settlement fees, and homeowner’s association fees, among others. These costs can quickly add up. Choosing the right mortgage company that will not only close your loan fast but also gives you the most value is crucial. Our pre-qualification and verified pre-approval processes will be upfront with you about what closing costs to expect so that you can adequately prepare.

Loan Term and Mortgage Programs

The schedule by which you pay back your mortgage loan will vary depending on whether you opt for a fixed-rate mortgage or an adjustable rate mortgage, or ARM. Fixed-rate mortgages are typically offered in either 15-year or 30-year arrangements. These options will provide some stability and consistency to your debt payments, and may be best for you if you plan on staying in this home for the long-term. The more consistent, fixed-rate mortgage options do tend to come with higher interest rates than do ARMs. An ARM will start at a fixed rate (usually for a period of 5 or 10 years) and then transition to an adjustable rate, based on market fluctuations. A unique type of ARM is a 5/5 ARM. It has a 30-year term with a fixed interest rate for the first 60 months. It adjusts in year six and every five years after that. Therefore, you can expect adjustments in years 6, 11, 16, 21 and 26. Therefore, this may be a more stable adjustable mortgage option. If you know you will be moving in 5 years; an adjustable rate mortgage may be a good fit. Candor Mortgage’s knowledge-based approach to helping you shop for a mortgage can help separate fact from fiction about different loan options and determine what’s best for you. For more clarification, check out our guide to navigating common myths about buying a home.

Overall, when shopping for a mortgage, it’s of the utmost importance you choose the mortgage company that not only will give you the best mortgage but deliver on your loan closing. By choosing the right company, you will be able to move forward to buying a house with confidence. At Candor Mortgage, we’re committed to helping you find a mortgage and a home that’s best for you. Our expert team will work with you every step of the way.



Who Has Better Mortgage Rates, a Bank, Direct Lender or Mortgage Broker?


Faster.  Lower.  Better.

These are the advertising keywords you probably see every day.  It seems all mortgage companies advertise the best service, lowest rates and closings in the blink of an eye.  One of the biggest mistakes loan shoppers make is assuming that everyone is the same.

The three types of companies are a bank, direct lender or mortgage broker.  When shopping for a mortgage, you have many choices.  By knowing the difference, you will identify which company type is right for you and how to get a better loan.

Mortgage lending differences

While there are many differences between the three types of institutions, there is one common factor.  A conventional loan from a bank, direct lender or mortgage broker is the same Fannie Mae or Freddie Mac loan.  The only difference may be the interest rate and closing costs.

Banks and direct lenders lend money and underwrite loans, brokers do not.  Banks use their own money or borrow from under banks or even the Federal Reserve.  Lenders have access to one or more lines of credit from a bank or financial institution.  Think of this like a big credit card.

Think of this as a credit which can fill up and max out.  These lines of credit can very profitable or costly.  When banks and lenders take on the responsibility of underwriting a loan, they accept the risk of an unmarketable loan.  This is a very expensive proposition.  Often scrutinizing and requesting more paperwork.  A broker does not lend directly or have a line of credit.

Banks and direct lenders normally only have one option, their option.  Brokers work with multiple wholesale lenders and have access to multiple loan options.  The wholesalers compete for the broker’s business. These wholesale channels are not open to the public, you need a broker for access.

How Loan Pricing Works

According to the CFPB, nearly 50% of new home buyers do not shop for a mortgage1.  For example on a recent loan, we are competing with a bank and we are .25% better in rate and a similar cost.

Broker Scenario:

The principal and interest payment on a $375,000, 30-year Fixed-Rate Loan at 4.500%, $150,000 cash-out, and 38% loan-to-value (LTV) is $1900.07 with 0 points due at closing. The Annual Percentage Rate (APR) is 4.553%. The principal and interest payment do not include property taxes and home insurance premiums, which will result in a higher actual payment. Rates current as of 3/8/2018.

Bank Scenario:

The principal and interest payment on a $375,000, 30-year Fixed-Rate Loan at 4.750%, $150,000 cash-out, and 38% loan-to-value (LTV) is $1956.18 with 0 points due at closing. The Annual Percentage Rate (APR) is 4.750%. The principal and interest payment do not include property taxes and home insurance premiums, which will result in a higher actual payment. Rates current as of 3/8/2018.

image of a graph showing a comparison between payments and savings over 5-years and life of the loan

A bank and direct lender set the interest rates and therefore the profit.  Brokers are compensated by the wholesale lender.  Operating as a bank or lender is costly.  Lending money and lines of credit cost money.  If there is a loan buy-back or cannot be sold, it’s very expensive.  To fund loans, you need to hire funders and underwriters.  This additional overhead is priced in the interest rate or closing costs and is passed along to you.

Brokers tend to have lower pricing compared to banks and direct lenders.  Brokers do not have the overhead of underwriters, funders or lines of credit.  Brokers do not have the marketing and management overhead either.  You probably will not see commercials from brokers on TV.  There will be no celebrity endorsements.  You will not find layers and layers of management or administrative overhead.  Brokers tend to operate with much less overhead.  As a result, brokers are often able to offer lower rates and costs compared to your bank or direct lender.

Who has the better service?

A bank, direct lender or mortgage broker will follow a traditional loan fulfillment model.  A banker/loan officer takes your application.  Your loan is then handed off to a loan processor.  A typical processor has 30-40 files to work on every month.  The daily attention given to a file is therefore limited.

Getting them on the phone is usually difficult.  To make matters worse, the processor is usually located in another state, in a different time zone and works in a processing call center.  The odds are stacked against you because another person is delivering on the promises of the banker

How we deliver better mortgage rates

We designed Candor Mortgage to operate with minimal overhead.  We don’t pay our people a commission.  Commission structures are used to manipulate people.  Plus, someone will probably put their commission before your needs.  We merged the role of the processor and loan officer to create a one-person support system.  The same person who helps you initially is also the same person who helps close your loan.  It’s really that simple. 

Get a rate quote today and see for yourself that our rates are lower.

Get a Jumbo Mortgage With Conventional Rates


If you live in one of the counties in the table below, a conventional high-balance mortgage may be a better option if your loan amount is above $484,350.

Have you tried refinancing only to be told your loan is non-conforming or Jumbo?  Are you looking to buy a home only to be limited by your county loan limit?  It’s likely the county limit in your area for a conventional conforming mortgage is $484,350.  A mortgage above this amount is called a conventional high-balance mortgage.  Save by getting a conventional mortgage up to $726,525.  Now available in all counties throughout California.  If you are looking to refinance, get a better loan.  If you are buying a home, buy a home with less stress and a lower rate or cost loan.

Conventional High-Balance Mortgage Details:

  • Fast turn times, averaging 15 days or less
  • Purchase, Cash-out and Rate and Term Loans
  • Starting at a 680 FICO
  • 20% down for purchases
  • 80% Loan-to-value (LTV)
  • A maximum debt-to-income ratio is 43%
  • Primary and second homes
  • 1-2 units

Loan limits in California

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Is a 5/5 Adjustable Rate Mortgage (5/5 ARM) Right for You?

Best ARM Photo

An Adjustable Rate Mortgage (ARM) is not for everyone, but everyone should know about them.  If you know for certain you will be moving in the next 5-10 years, an ARM may be the better choice.  A 5/5 ARM just might be the perfect loan for some in 2018.  A mortgage with a lower rate can save you money.  People move for various reasons, life happens.  You may move for employment, family or housing needs.  According to the Census Bureau1, people move on average of 11.7 times within their lifetime.

How mortgage reform created a better ARM

In 2010, President Barack Obama signed into Federal law The Dodd-Frank Wall Street Reform and Consumer Protection Act2 (a copy may be found here).  The act eliminated risky features like pre-payment penalties and negative amortization.  Most ARMs today use a more stable index.  For example, a 5/1 ARM uses the 1-year Libor while a 5/5 ARM uses the 5-year CMT.  To find your interest rate, add the index + margin.  

Is a 5/5 ARM, a balance of stability and lower rate?

A 5/5 ARM might be the better choice for some.  The low initial rate stays fixed for 5 years.  After 5 years, it adjusts once and is fixed for another 5 years.   That’s two adjustments in 15 years.  A traditional 5/1 ARM is fixed for 5 years and then adjusts every year thereafter.  The rate can adjust by a maximum of 2% every five years.  The cap or the limit of the interest rate change is 5% from your initial rate.  If rates come down, your rate will as well.

Choosing the right tool for the job:

Interest rates as of 2/21/2018.  This is some sample purchase loan rates for a purchase price of $500,000 and a loan amount of $300,000.

How much can you expect to save compared to a 30-Year Fixed?

Other considerations

According to the Urban Institute, only 2.1% of people obtained an ARM in 20163.  Close to 98% of consumers obtained a fixed rate.  In a low rate environment, an adjustable rate mortgage usually does not make sense.  If rates go up more, the spread will increase and Arms may be more attractive.  A 5/5 Arm is priced close to a 5/1 Arm and gives you more stability because the adjustment periods is every 5 years, not every year.

  1. For example, you plan on moving or refinancing in the next 5-10 years.
  2. You expect your household income to increase in the next few years.

Life is unpredictable.  While we always hope for the best, we should still plan for the worst.  You may want to speak to a financial advisor to come up with your worst-case numbers.  Basically, you will want to know the minimum income needed to cover your expenses if something were to happen.


An ARM may be a solid choice if you are planning on moving in the next 5-10 years.  Some of the pluses are a lower monthly payment or attacking your principal balance.  If you are considering an ARM, take a look at the 5/5 Arm.  It adjusts only once every 5 years.  In 15 years, there are only two adjustments.

Our goal at Candor Mortgage is to support you with solid advice.  We are here to give you the information you need to make the right decision for you.  If you’re interested in learning more or discussing your unique situation, call us at (800) 714-3184.

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  3. Housing Finance at a Glance.  The Urban Institute.  March 2017, Page 9.  A Monthly Chartbook.