A fairly recent study from the Consumer Financial Protection Bureau found that more than 75% of borrowers only apply for a mortgage with a single lender or broker.
Borrowers’ reluctance to shop around is partly why the CFPB pushed for its Know Before You Owe rule, which those in the mortgage business know better as the TILA-RESPA Integrated Disclosure rule, or TRID.
Part of the Know Before You Owe program is a loan estimate form that shows borrowers all of the costs, fees, and terms associated with their mortgage before they agree to the loan.
The idea behind that form is two-fold: First, to fully educate borrowers about what they’re getting into with their mortgage, and second, to allow the borrowers to shop around for a better option.
And while some lenders may not like that borrowers are encouraged to shop around, one lender is taking the exact opposite path – and actually incentivizing borrowers to shop around.
Better Mortgage, an online mortgage lender, is now offering borrowers a guarantee that its mortgage is cheaper than any other lenders’ options.
Specifically, Better Mortgage rolled out what it’s calling the “Better Price Guarantee.” Through the program, Better Mortgage guarantees that it will beat any competitor’s loan estimate by $1,000. If not, Better will give the borrower $1,000.
Here’s how it works, according to Better Mortgage:
If the customer thinks another lender has a more competitive price, they can send Better the competitor’s Loan Estimate within three business days from the date on the loan estimate. If Better can't beat the competitor’s LE by at least $1,000, Better will give the borrower $1,000 in cash when they fund with the other lender.
Earlier this year, Better Mortgage announced that it raised $15 million and planned to use the money to launch and expand Better's home purchase finance product on the company’s website, Better.com.
The company claims that it can serve borrowers better (no pun intended) than other lenders and now it’s ready to prove it with a four-figure financial incentive.
“Buying a house is fraught with stress - both emotionally and financially - so homebuyers might not be shopping around for the best priced mortgage. And even if they are, they might find it impossible to compare costs,” Vishal Garg, CEO of Better Mortgage, said.
“If people are doing comparison pricing on their groceries, shouldn’t they be able to on what might be the biggest purchase of their lives?,” Garg continued.
“Our mission is to turn the mortgage industry on its head and to empower consumers with transparency, affordability and a no-BS approach leveraging technology and data,” Garg added. “It’s why we’re putting our money where our mouth is with the Better Price Guarantee.”