Choosing Broker
We are scheduled to close on an apartment within the next 30-45 days. Problem is, I am still trying to line up a loan. It is a 3 unit, self-managed condo in a brownstone and the broker we were using up until now recently bumped the rates up a little bit to 5.375. He has…
We are scheduled to close on an apartment within the next 30-45 days. Problem is, I am still trying to line up a loan. It is a 3 unit, self-managed condo in a brownstone and the broker we were using up until now recently bumped the rates up a little bit to 5.375. He has been great along the way and has assured us that he will get the job done. We are getting a conforming mortgage for $417,000. I found a different broker a couple of days ago who said he can lock in a 45 day rate at 5.125%. Problem is, he will have to run our credit again (last time was 40 days ago) and he isn’t 100% sure that a bank will finance the deal (currently looking into it).
Apologies for blabbering on, but we are first time buyers and need some advice 🙂 Should we go with the 5.375% broker who can get it done for sure, or get the better rate at 5.125%?
Thanks 🙂
Keep in mind your broker is acting as a lender, and disclosure rules for lenders apply. Good luck with everything.
Hi guys (and gals), just wanted to update you all. First, thanks for all of the helpful and constructive feedback. Second, we have decided to stick with our original broker and locked in a rate at 5.375. To second guess and nickel and dime every move and is not only tiring, but from what I have learned so far a little bit dangerous. They are underwriting the deal themselves and takes a little bit of risk out of the proceedings. Babs, I think you are spot on with your observation.
Looking forward to (hopefully) closing in the next 3-4 weeks. Fingers crossed and thanks again!
From my experience it is all but impossible to get a mortgage on an apartment in a three-unit building. If your guy can get it for you stick with him — otherwise you may wind up in a very bad place
The difference in payment is $64.57
=PMT(5.125%/12,360,417000)-PMT(5.375%/12,360,417000)
You could always buy down the points to get to 5.125 from 5.375. If you have a sellers concession, you cannot leave any of those funds on the table once you close. Actual closing costs are around 4% even though everyone says 6%. That will likely leave you with enough money to buy your rate down to what the other guy says – he has not collected supporting documentation or run your credit and is probably saying whatever he can to get your business. With a tricky situation like what you are buying into, it seems like you are splitting hairs and may risk losing the condo and perhaps your DP over this.
Hi wyckoff, thanks for the comment. Currently, we are not locked in, but the figures I am going by are the ones provided on the GFE (which I got from each broker on the same day). It just seemed odd that my first broker was insistent on 5.375 whilst the second guy assured me he could do 5.125. Now, the difference between the two is I have gone through the credit application with the first broker who is funding this internally (and they are selling the loan to the bank later…or something along those lines). I think that is why he assured me this could get done.
Going with the second broker would certainly be introducing a bit of uncertainty into the mix in terms of going to a different bank.
Well, I don’t like to nickel and dime people and you are right about the $80 or so. It isn’t life or death so sticking with the original broker might be the best way to go.
Thanks again for your input.
1) You may already be locked in, depending on what you’ve signed. 2)Likely you won’t get the new bank to underwrite within 30 days, so you could be left with no financing, as you would have to tell your original broker you’ve decided not to finance through him (otherwise you risk having both loans fall through due to the appearance that you are trying to take out two mortgages on the same property). 3) Interest rates move, so comparing quotes at different points in time is not comparing apples to apples. 4) Your new broker, assuming you’ve told him that you’ve already locked in a rate, is by definition a scumbag for trying to sell you a new loan at this point. You want to think twice before trusting him.
So, you have to ask yourself, is $86.88 per month worth the bad karma? You could easily make up the difference over the life of the loan by simply pre-paying a small amount of principal every year.
Bottom line though, these rates are very low in both absolute terms and historically. Very, very low.
Dave, thanks for that info. I wasn’t aware of that. To be fair to the first broker that I have been dealing with, who quoted 5.375, he did say that with rates where they are now the 5.125 rate was very unlikely. The second guy who quoted 5.125 keeps saying 5.125 can be ‘locked in today!’.
Henry, thought about going to the bank directly, but it is a difficult unit (i.e self-managed, no cash reserves, 3 unit condo), so going through a single source is a little bit risky for me. Thanks though!
(Also, first time buyer and will probably look back in 5 years and wonder what the hell I was thinking 🙂