Small Lender vs Big Lender

[hajew86]

Hello,

I have a question about interest rates as it relates to a small vs. big lender.

I put in an offer on a house, got a counter offer back and one of the stips the listing agent requested was that I dont go with any big lender, and in the counter offer that was sent back it sepcifically called out 4 "big" lenders, Quicken, Wells Fargo, BofA, and Chase. Her reasoning was that her past experiences were terrible and used "13" as a number of deals that fell through. I was already pre-approved by both Quicken and Wells Fargo however I obligized and looked at a neutral small lender, got pre-approved, bada-bing... offer accepted.

Long story short, I've been quoted at 5.25% on a 30yr FHA w/ $2000 given to me by the small lender for closing. I spoke with the loan officer at Wells Fargo and she came back at 5% w/ $2200 towards closing...

Am I getting ripped off by the smaller lender?? Can I negotiate with smaller lender?? Need advice please, thanks.

[StartingOver10]

Yes. you can negotiate with the smaller lender.  No, you aren't getting ripped off by the smaller lender.

 I have much more confidence that the loan with the smaller lender represents reality and will actually close with the terms stated than what happens with either Quicken, Wells, BOA or Chase. Those lenders are notorius for promising one thing and then taking so long to process the deal that the terms end up being something else all together - and not in your favor either.

I have a small regional lender here that is still writing conventional loans up to $750k for 4.5% with no MI, no points etc. So negotiate. You stand a much better chance of getting a better deal from a smaller lender. AND, it probably will close ontime (another bonus!).

[StartingOver10]

I meant to mention to you earlier that you would be in a better position to negotiate if you either pay your own closing costs or, if that's not possible, have the seller pay some or all of your closing costs rather than having the lender build in a small portion of the costs into your interest rate.

The lender has all the cards if you allow them to pay a portion of your costs. If you don't have any other resources, go back to your seller and renegotiate the purchase and sale contract. You can add back the amount needed as long as it meets lender guidelines and the house hasn't been appraised yet. You can add it with an addendum and the seller will net the same amount. You will be in much better shape in the long term to pay say $2500 more for the house and get $2500 at closing than to bump your rate for 30 years. Go to bankrate.com and figure out the difference between the two payments, 1) at current market rate and 2) at the premium par rate that the lender quoted. Add up the difference over 360 payments (30 yrs x 12 months x $y/mth) and you will see that you are paying many times over for that $2000 to $2200 at closing,