Everyone wants to get the best deal, right? We take the time to cross-reference prices online and in stores to save a few dollars whenever possible. Brian Simmons — the CEO of the real estate publication Scotsman Guide in Bellevue and founder of the lender search engine, Ask a Lender — said recently that he was searching online for his pet’s flea medicine, and after 45 minutes he saved $3.
So, if people are willing to hunt down the best deal for everyday products, why are the majority of homebuyers leaving their biggest purchase up to chance? Simmons said most are dialed into negotiating and renegotiating the sticker price of real estate but aren’t doing any leg work to compare mortgage rates between lenders — you know, the part that dictates how much you’ll actually spend on that four-bedroom abode.
One-eighth of 1 percent can translate to thousands of dollars lost over the life of a mortgage. Simmons had trouble finding a mortgage lender for a foreclosed investment property in Arizona. It got him thinking: How is the most-connected guy in mortgages having trouble finding a lender?
“What are the resources for the consumers to access this information?” he asked himself. “I had no idea. I just didn’t think about it, but then I had a loan that I did in another state. I went with the real estate agent’s recommendation, which many times works out, but in this case (the lender) wasn’t accustomed to dealing with foreclosed properties.”
Simmons realized that aside from going with a real estate agent’s recommendation for a mortgage lender, there really aren’t any platforms that connect consumers with a lender for the specific loan they need. Many mortgage rate sites appear to compare loan offers for free, but Simmons said what they are really designed to do is generate leads for lenders.
“(Lenders) are paying an extraordinary amount of money for those leads,” he said. “They’re worth a lot of money, and, by the way, you’re not going to see rates. Now, let’s say they do show you a rate on the next page. It’s not going to be a real rate. It’s just not.”
After surrendering your contact information, these lead-generating sites may flash a seductive loan rate, but it’s highly unlikely that after receiving all your information, a loan officer would offer that specific rate. Most of the time, rate comparison sites ingest your general information and spit out an interest rate that’s the best-case scenario. It hardly matches reality, he said. Simmons related the model to submitting your phone number to Expedia and letting Expedia tell you which airline you’re going to fly.
“I don’t think consumers would accept that model,” he said. “That’s why this was puzzling to me.”
So, for three years, he studied every possible loan scenario that exists in the United States and identified 6,000 underwriting variables. Underwriters are the ones who determine how risky it is to offer the borrower a loan, and they go through a painstaking process to ensure the bank or the loan company isn’t issuing a loan to a risky person.
Once the research was completed, Simmons thought: What would be the most useful to consumers? How could he help people find a lender that would best suit their needs?
His solution was Ask a Lender, an online site based in Bothell that allows visitors to search for any type of loan, from student and debt-consolidation loans to mortgage and business loans. It’s all there, and it launched in November 2017. Once a site visitor selects the kind of loan he wants, the site allows for advanced searches, so a borrower can input exactly what kind of loan they need, and it matches him with lenders who offer that program.
Ask a Lender never offers any rates, because Simmons doesn’t want to mislead anyone. The burden is then on the borrower to contact lenders. If they ask for loan rates from two to three lenders, they’ll have a good idea of whether they’re getting the best rate, he said.
“Even the smallest (change in) percentage can make a big difference.”
The benefit to lenders is free registration, which means they’re more likely to post all their loan programs instead of just their most-profitable ones. Ask a Lender makes a profit when lenders opt to be verified — a process that checks whether their license is in good standing and whether they’re authorized to conduct the business they’re doing. Verified lenders appear before nonverified lenders, and they can pay extra to appear higher on the list.
Shopping around for the lowest mortgage rate is especially important on the Eastside, where home prices often exceed half-a-million dollars. In most markets, any loan amount above $453,100 is considered a jumbo loan, and jumbo loans are offered only on the private market, where loan rates vary quite a bit.
“Even the smallest (change in) percentage can make a big difference, especially compared to the flea medicine I was shopping for,” Simmons said. “And that’s what we all do, right? We use all this technology to shop online. We have all become like, the X-Men shopper, because we have this technology to shop for flights and whatnot, but for whatever reason, all the loan programs haven’t been gathered onto one database.”
Simmons just happened to have spent the last 25 years making his living as an expert in loans and underwriting. It just took a “big nerd” like him to put all the information onto one site.
Ask a Lender also has a trove of articles supplied by his full-time journalists about loan programs, so if someone wants to understand what a reverse mortgage is, or what he can expect buying his first home, all the information is right there.
So far, roughly 3,000 lenders have signed up, and in the next few years, he expects about 20,000 lenders will be listed.
He and his brothers invested about $2.5 million to launch the business. It was nerve-racking to start a new company, especially when he wasn’t sure how it was going to turn a profit. But the venture felt like a necessary risk, one that could help thousands of people, he said.
“I’m 41 years old, and I love what I do at Scotsman,” he said. “But I started to see what people were doing with (mortgage rate sites), and I just kind of wanted to say: ‘It isn’t special to find a lender. I can help you with that and put you in control and make the odds turn in your favor.’”