Information, Please!

In the 1940’s a radio program called Information Please was quite popular.   People would send in questions to be asked of an expert panel.   The panel members were experts in various fields.   This show was before my time, but I have heard recordings of the shows.   I can attest that they were quite interesting, although fans of Jeopardy would be a little disappointed at the number and breadth of the questions. Remember that this was over 50 years ago.

In the real estate and mortgage business these days there is a hunger for information but it is not the most important thing. Let me explain.

I was having lunch with some friends. We were discussing investments and one said, “I’d sure like information about good stocks.”  

Another immediately stated, “I have a publication that lists all of the best stocks!”

Excitedly, he asked to see it, and was somewhat shocked when he was handed a copy of The Wall Street Journal.

Yes, all of the good stocks ARE listed there. The problem is that all the bad ones are too.   More to the point, they are all mixed up.   The important thing is not the information, but an analytical framework in which to separate the good from the bad.

Even there, there is clearly no consensus on the best framework.   Technical analysts look at charts, fundamentalists try to forecast earnings and cash flow, and others look at factors they feel important.   One very successful fund manager I know places a lot of emphasis on sales, figuring that it is more difficult for management to fudge sales figures.

Bottom line, it is important to have some rational basis for making investment decisions, and I hope that you with have or are working on one for your 401(k) and other investments.

It is no different in the mortgage business.   We have TONS of information.   There are over 50,000 websites with information about loan characteristics and, of course, rates.   To me, having all of that information isn’t much different than being handed a copy of The Wall Street Journal.

I have worked with over 3,000 families who were buying or refinancing a home, and I have first hand experience that when people have just information, even if it is completely accurate, they are still confused.   You have to make some decisions, and the information alone is simply not enough.   Let me give you a simple example.  

Let’s assume that I was able to give you a CD with today’s rates of every lender in the country.   That is an overwhelming amount of data, certainly well over 1,000,000 pieces. How do you start to analyze this?   It would take a month, even if you already had the tools.   That is a task clearly beyond the capabilities of almost everyone.

More to the point, it doesn’t answer the fundamentally important questions:   What are my goals?   What type of loan best helps me meet those goals?   Which lender has the best rate on that program? Does is make sense to pay points? When should I lock in the rate?  The sad thing is that most people don’t ever get to those questions.  

I firmly believe that most people shop for a mortgage until they find a “good salesman,” and that person sells them what they have been trained to sell.   Not surprisingly, in a majority of cases the decisions get made FOR the borrower, not BY the borrower, and they are better for the lender than the borrower.

The good news is that there really are better answers to these questions, answers that can be developed through rational analysis. I devote over 250 pages in my book to those topics. It does require a little work, but look at the payoff!    And of course, if you find a good mortgage professional who will act in YOUR best interests instead of the lender’s interests, he or she can help you through the process.

The difference between making good decisions and mediocre ones can easily be $10,000 or more during the period you are likely to have your home.   That’s the power of doing it right.  

Keep the faith!