Why Borrowers Shop Rates

When potential clients inquire about rates, first ask what they really need

The answer to the question of why borrowers shop is far more complex than “because they want to,” and understanding the core reasons for why people shop around for mortgages can help originators improve their results with potential clients. The real answer to this question is painfully clear: It is because they have to.

As we break down the factors of why borrowers shop around for mortgages, it is important to realize that originators can alter this trend if they are willing to change how they answer the biggest question posed by borrowers: “What is your rate?”

Many originators tend to be their own worst enemy. Their marketing and customer interactions actually create the issue of rate. They advertise best rates and then answer the rate question far too quickly in initial conversations. Even worse, in the race to market rates, many originators fail to follow through on the five basic sales techniques they should use on every phone call:

■ Get the borrower’s name. This should be your first question so you can use the caller’s name during the call to build rapport.

■ Ask for a phone number and e-mail address. You will need this for follow-ups.

■ Find out the reason behind the call. Without this information, you cannot sell to their needs.

■ Ask if a Realtor is involved. If you get the name of the caller’s Realtor, you can reach out to that agent afterward to open up a new relationship.

■ Ask to start the loan process. You would be amazed how many originators fail to do this before the borrower hangs up.

These five items should be used as a minimum barometer of a successful call. If originators are failing to do even this much, is it any wonder that customers are dissatisfied with the service they receive when shopping for a mortgage?

Change the question

To begin changing the way people shop for mortgages, the industry needs to realize that borrowers shop because they are being “told to” instead of being “sold to.” This may be the biggest challenge. Sales people often are too eager to tell clients why they should apply with them, even before finding out if the borrower truly needs what they are offering.

Unfortunately, many originators associate telling with selling. It is easy to talk about the perks you can offer, but the awareness of what each borrower needs for a particular mortgage situation is the critical element of selling, and probably the part least understood by some salespeople today. The rush to tell borrowers what you can do without being aware of the reason for their call is why people shop around. They get inundated with offers without ever knowing if they truly need what is being thrown at them, so they move on to another salesperson.

The first step in changing this approach is to learn to ask more than you tell. This can be hard to do for traditional sales people who associate selling with impressing customers with their capabilities instead of thinking about what the client truly needs. Why do many originators default to discussing 30-year mortgages, for example? It is because they advertise that rate, which means borrowers inquire about those products. This conditions originators to continue going down that path, which is a major error. The mortgage industry offers a diverse set of loan products for a reason. It’s because there is a need for them.

Knowledge is sales-power

The key to selling is to remember that the client has a reason to call. It did not happen randomly. If you let them share that reason, more often than not you can find a way to meet that need.

Whether they realize it or not, most borrowers are looking for a professional financial adviser to help them make the single-largest debt decision of their lives. If you are going to be that adviser, you need to take that responsibility seriously. Knowledge is power. Use it to show potential clients that you are the financial expert they should work with on their mortgage.

The first step in this process is finding the proper loan product for their unique situation, not simply pushing a 30-year loan on them. Why is this so important? With the variety of loan products available, the ability to pick the proper product for each borrower is the most critical issue an originator faces when they engage with potential borrowers. Therefore, complete product knowledge and the expertise to structure a customer’s loan is essential if you want to differentiate yourself from your competition.

To begin determining the best loan product for a borrower, start with this one crucial question: “How long do you plan on staying in your property?” With this question answered, you can start to determine the right loan program for that borrower.

More often than you think, the right program is a hybrid fixed-rate/adjustable-rate product — a five-, seven- or 10-year fixed-rate program that converts to an adjustable-rate mortgage (ARM) at the end of the initial term. Some originators panic when suggesting this product and call it an ARM, which many borrowers immediately resist out of fear of the word “adjustable.”

In fact, for borrowers who plan to move or refinance within the selected fixed term, a hybrid ARM works just like a fixed-rate product during that period, with lower payments than a 30-year fixed-rate mortgage. By asking one simple question, you can open up a discussion on products that actually fit what the borrower needs instead of simply telling that borrower your rates and moving on to the next call.

To address the question of why borrowers shop around for rates, originators must look inward for the answer. Do you have the product awareness and professional approach to deal with inquiries about your rates? Sadly, many originators do not. Instead they share unnecessary information that isn’t relevant to the borrower’s needs and fail to help borrowers make good decisions by suggesting the wrong products.

If you want to control your own destiny on sales calls, you need to focus more on selling what borrowers need as opposed to telling them what you have available. Determining what borrowers are truly looking for when they call is the most important element in sales. By asking the right questions, you can start to turn the tide in your favor and leave little incentive for your potential clients to shop around.