broker's rates vs bank's rates

[SantaMar]

llhj;

[cdtotten]

Brokers can often get you a better rate than a local bank, because brokers have access to a network of lenders at their disposal. The only real benefit of using a bank over a broker, is that if you choose a bank.... usually that bank will be the one that services your mortgage payments. A brokered loan will be sold off to an investor company who will take over service, so you have no control over who you get.

Regarding rates - in conventional financing, your rate is dependant upon the lowest person's middle score, so your fiance's 690 if that was her middle score. That is not a great credit score for conventional financing and will likely cost you .5-.75%. You can ask, but the LO's rate was probably 4.0% for best credit and 4.5% for your situation. Yes, you can buy down the rate - 1 point is typically 1% of the loan amount, and it will vary how much it can lower the rate (sometimes 1/8% sometimes 1/4%). You have to calculate the cost of the point vs. how much it will save you per month to see the break even point. If you aren't stayin in the house that long, not worth doing.

Finally, there is nothing wrong with paying taxes/insurance yourself, but you need to make sure you are disciplined enough to do so. If it comes tax day and you owe $3k and you can't pay it, you are setting yourself up for major issues.  Another thing to consider is some lenders will charge you .25% or so as a fee when you close for not choosing to escrow. This is fairly significant in some cases.

[Anonymous]

+ to the above.

Theoretically, a good broker pays for themself by finding a better rate than a bank. However, going with a bank or credit union may be a better choice if you have any kind of relationship with them.

Knowing who's going to service your loan is also a good thing, but there aren't any guarantees...

[StartingOver10]

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@cdtotten wrote:

Brokers can often get you a better rate than a local bank, because brokers have access to a network of lenders at their disposal. The only real benefit of using a bank over a broker, is that if you choose a bank.... usually that bank will be the one that services your mortgage payments. A brokered loan will be sold off to an investor company who will take over service, so you have no control over who you get.

Regarding rates - in conventional financing, your rate is dependant upon the lowest person's middle score, so your fiance's 690 if that was her middle score. That is not a great credit score for conventional financing and will likely cost you .5-.75%. You can ask, but the LO's rate was probably 4.0% for best credit and 4.5% for your situation. Yes, you can buy down the rate - 1 point is typically 1% of the loan amount, and it will vary how much it can lower the rate (sometimes 1/8% sometimes 1/4%). You have to calculate the cost of the point vs. how much it will save you per month to see the break even point. If you aren't stayin in the house that long, not worth doing.

Finally, there is nothing wrong with paying taxes/insurance yourself, but you need to make sure you are disciplined enough to do so. If it comes tax day and you owe $3k and you can't pay it, you are setting yourself up for major issues.  Another thing to consider is some lenders will charge you .25% or so as a fee when you close for not choosing to escrow. This is fairly significant in some cases.

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Yes, a good broker can get you a better rate. However, there are vast differences among brokers (just like other professions). 

Some brokers have a short term view of the process - I call this a "transactional" view. In other words, they are not looking out for your best interest - they just want to get the most commission for the deal. [The broker gets paid based on the fees charged to you upfront, plus he gets paid based on the ysp (yield spread premium). A broker has to disclose to you what the ysp will be on the loan. It will be on the final HUD. ]

Other brokers really are in it for the long term. They are looking out for you to see that you get the best combination of rate and terms based on your whole file. Your whole file includes your credit, your income, debt, and anything else that would affect the loan terms. This is the kind of broker you are looking for when you purchase. They are out there, but you will need to shop to find one.

Solution: You can get quotes from brokers and direct lenders without having them pull your credit. They can make their quotes subject to pulling your credit. Have each lender give you all the terms so you can compare. The best way is to compare GFE's with each lender. If they won't give a GFE, get the same info in a closing costs worksheet (or whatever their name is for it). It has all the GFE info so you can compare each and every element of the loan.

[DallasLoanGuy]

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@SantaMar wrote:

it would stand to reaosn to a novice that a bank would have better rates considering, well, a broker will get the money from a bank so they mustttt take something off the top?

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broker gets a discounted rate from the bank to help the broker cover costs of originating.

broker is NOT a middle man

'usually' mortgage broker or mortgage banker will have a better rate than one of the big banks

[namvet]

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@DallasLoanGuy wrote:

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@SantaMar wrote:

it would stand to reaosn to a novice that a bank would have better rates considering, well, a broker will get the money from a bank so they mustttt take something off the top?

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broker gets a discounted rate from the bank to help the broker cover costs of originating.

broker is NOT a middle man

'usually' mortgage broker or mortgage banker will have a better rate than one of the big banks

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+1  Many years ago (pre 1980) a mortgage broker was a middle man.  Not true anymore since the invent of wholesale lending.  Modern day mortgage brokers are not in the business for the short term.  Every closed loan is worth several future loans from that source.  Do a bad job and no future loans.