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February 28, 2007
Did you use a mortgage broker?
Hi Brownstoners, we're buying our first home and aren't entirely clear on the mortgage process--do mortgage brokers help lower your rates? Streamline/expedite the process? Or are they just an additional unnecessary expense? Our credit is close to 800--should we just approach banks ourselves? Any advice would be very much appreciated.
Comments
I think the logic with using a broker is that you can get quotes from multiple banks at the same time and theoretically they will guide you thru the process. Personally i am not crazy about mortgage brokers. Most don't seem that knowledgable and some seem downright shady in their practices. You can call up banks directly or you can approach these companies that offer financing themselves and usually they end up selling the mortgages to major financial institutions. Sometimes they have very competitive rates.
Posted by: Anonymous at February 28, 2007 3:23 PM
3:23 is right about the knowledge level of mortgage brokers (or at least the simp i got for mine), but what these brokers have over everybody else is the ability to get wholesale rates from lenders. these rates will be lower than what you could get going directly to a bank, good credit or not. definitely use a reputable broker, but don't expect them to do anything but get you a good rate.
Posted by: JL at February 28, 2007 3:43 PM
It seems to me that Google has replaced a mortgage broker. It's easy to find different rates online. Why would you need a broker to do that for you, unless you are uber-rich.
Posted by: sf at February 28, 2007 5:37 PM
There's a ton of mortgage products out there and I think it takes an expert to navigate them. Me, had excellent luck with my broker. Got a great rate - which in my case wasn't as easy as googling 'cause I was dealing with a 2-fam, very large number (for me) purchase. And he helped expedite the process.
Agree though that some are iffy. First broker I used back in the day was useless. For my townhouse, different story entirely. Plus, bulk of broker's comp is via the lender.
Have a good recommendation if you want.
John
Posted by: John at February 28, 2007 6:02 PM
If you have some business saavy, I'd say to hedge a bit and do both, however the banks are really quite hungry for your business, so you can probably do better going through them.
We went through a broker up to the point where we had a signed commitment letter from a bank awaiting only our countersignature to go to closing.
At that point, with 30+ days left before the contract expired, we started shopping around with banks since we figured we could always just go to closing with the broker's loan.
Our bank offered to "beat any other rate", so we took them up on the offer and ended up getting over a 1/2 point lower on our mortgage and 3/4 of a point lower on our home equity line.
We ended up losing out on a $600 application fee paid to the mortgage broker, but we recouped that expense within 2 months of mortgage payments.
Also, the bank didn't charge us the bank-side closing costs (about $2K) and we didn't have to pay the $1800 lock fee the mortgage broker was trying to charge us.
And then there's the broker's 1 point fee, which although it's supposedly charged to the bank, comes out of your pocket in the end through a higher rate.
Posted by: Anonymous at February 28, 2007 6:27 PM
The first time we mortgaged, our broker found us a rate 2 points lower than the nearest bank rate. We were financing a 2-family at above the fannie mae maximum (now labeled a "jumbo") and our broker got us the non-jumbo rate. 2nd time we financed, our broker got us 1.5 points lower than the bank rate. Bonus was that the lowest bank rate we found was from Citibank but the broker got us the better rate and better closing terms from... Citibank.
The downside to the experience is that we had to do a lot of due diligence to feel comfortable with the broker's answers to our questions. Both brokers spoke in that language that all fiscal people speak to ensure that no newbies get into their little club. If we hadn't done the legwork to figure what the hell they were saying, we would have been quite confused.
Posted by: Anonymous at February 28, 2007 6:53 PM
It makes a HUGE difference using a mortgage broker vs. going directly to the bank. Good agents do bulk business and get bulk discounts often better than a bank loan officer can even if you have been a customer for many years. I am not a mortgage broker but work in the biz.
Posted by: Anonymous at February 28, 2007 8:27 PM
I'm with 6:27. Play both sides. If you only use a broker, how will you know if you could have gotten a better deal by going directly to a bank? Also, ignore advice about Googling rates. Advertised rates are meaningless. What matters is the offer you are made by each individual lender/broker based on your purchase price, downpayment, income, credit history, etc. That is what you have to beat, not teaser rates which often come with hidden terms and fees. The short answer is, the more homework you're prepared to do, the better the rate you can get. Maybe a broker can get you a 'wholesale' rate, maybe not. PS
I got great info from http://www.mtgprofessor.com/, a site run by a Wharton professor of finance. Impartial and comprehensive. www.bankrate.com is also useful for compiling your shortlist of lenders to contact. Good luck!
Posted by: TW at March 1, 2007 1:11 AM
Hi. 6:27 back again.
To clarify, I'd go to the broker first and see what their best offer is.
If they're getting a bulk discount or "wholesale" rates, then ostensibly you wouldn't be able to get a better rate at "retail" prices. This was definitely not the case with us.
Also, if you're financing a loan over fannie mae conforming limits, consider getting a conforming loan and financing the rest with a home equity line of credit (as long as the overage is manageable for your situation). The blended rate may be quite a bit lower. Also, once you pay down the line of credit, you are left with a mortgage with a lower rate (assuming you're going for a fixed rate mortgage) and an open line of credit in case of any major unexpected expenses.
Last word of advice: if you do shop around, be SURE you have a decent amount of time remaining on the contract, as you are starting the loan application from the start again, and be sure you're at a point where you can move forward with the first loan option quickly if the second one isn't progressing fast enough (ie: commitment letter from bank, etc.).
Posted by: Anonymous at March 1, 2007 4:12 AM
I used a broker, and he was awesome. First time home-owner, only 25 at the time, I needed tons of help. I did try LendingTree first but was unimpressed by brokers who sent me form emails and on one occasion even sent me an email that was clearly intended for someone else entirely! Answered questions I had, explained to me different mortgage types, and ended up finding me a great rate (4.75%) on my co-op. He even came to my closing and called me AFTERWARDS to make sure everything was fine and dandy. His name was Shimon Rosenberg, by the way. Good guy.
Posted by: BrooklynZoo at March 1, 2007 10:57 AM
I've been burned by a mortgage broker. They did not do their due diligence and then came up with additional $3,000 that I had to pay because they had missed some aspect of the loan. This they told me at the end of buisiness, the day before closing. I am not exaggerating.
My feeling is that the fewer middlemen the better. In the end, even if they say the bank swallows the costs, these amounts always find some way to come from the buyers pocket.
Posted by: Anonymous at March 1, 2007 5:56 PM
Thanks everyone for your advice. John and BrooklynZoo, (and others with recommendation) if you can email me the contact info of your brokers, I'd really appreciate it.
My email is master_pink (at) mac (dot) com
Thanks,
Mary
Posted by: mary at March 2, 2007 12:31 AM
Dan S. --if you happen to read this, I tried to email you some info re: mortgage brokers but your hotmail account keeps bouncing back mail.
Posted by: mary at March 12, 2007 7:11 PM
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