Financing in 60004>Question Details

R01, Home Buyer in Chicago, IL

Mortgage - Bank or Broker?

Asked by R01, Chicago, IL Wed Jul 27, 2011

I'm buying a condo home for around $200K. I'm looking at 5/1 ARM with 10% down. I have really good credit: 790 FICO, $100K income, and low debt.
I received initial quotes from many brokers. I applied with the broker that my agent referred. He provided me a GFE with 3.25% rate (includes 0.25% condo surcharge), 0 points, $700 in lender fees. I have read that if your credit is good, you could get a much better rate with the bank directly.
My question is whether it would be a significant difference. I just don't want the hassle of dealing directly with a bank if the difference is minimal (like 10-15 basis points). If the difference is usually more, I could shop around.

I would appreciate any advise!

Thanks!

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Dale Logan’s answer
Have you checked with the bank where you have your accounts?

I've seen some banks that were higher and others that offer pricing that couldn't be matched. One in particular that paid for all of my buyers closing costs and the rate was still below anything that I could find available. I was skeptical that it was true till it closed.

I like to work with loan officers that I've done business with but if my clients want to shop around I tell them to check with their banks as well.
0 votes Thank Flag Link Wed May 23, 2012
My very simple and short reply...
If you trust your real estate agent, why wouldn't you trust their recommended lender?
Successful agents have a successful business network.
You should be presenting all your questions to your agent's recommended lender while you sit side by side with him/her.
0 votes Thank Flag Link Sun Sep 25, 2011
Believe it or not you most likely will get a better deal on an interest rate with a broker or a smaller lender vs. a large bank. Smaller lenders have the ability to higher or lower your interest rate to get you the best rate for your situation. Large banks have a set rate that their loan officers can offer you. When I moved from the world of big bank lending to small lender I was floored with the difference in rates, etc. Here is a quick video that might intrigue you since there is a common misconception that brokers will overcharge you and not the major banks:

http://tbwsdailyshow.com/2011/03/22/the-lo-compensation-fed-…
0 votes Thank Flag Link Thu Jul 28, 2011
The next two years are dangerous for Arms so think about if before you jump, the bank will more than talk you into one, they make good money on the interest rise!
0 votes Thank Flag Link Thu Jul 28, 2011
Stay away from ARMS. Rates shoot up you will want to refinance and then your term is reset again. Hard to make headway when your term is constantly reset. Also what the heck is some condo surcharge by a bank? Bogus is my opinion. They can try a rationalize any way they want. Still bogus.
0 votes Thank Flag Link Thu Jul 28, 2011
That rate looks pretty competitive but take a look at 2 or more offers or so. Compare with APR so you have a better idea of cost from one lender to the next.

A little more of APR: http://www.trulia.com/blog/elliott_r_oliva/2011/07/what_is_a…
0 votes Thank Flag Link Thu Jul 28, 2011
You need to look at both the interest rate AND the fees you are being charged on the day that you will be locking in. Anyone can quote you a rate, but it will be good only for that day. Same goes for published rates on a lender's advertising. If you're not locking in that day, you may not get the advertised rate. Your best bet is to work with a reputable loan officer who will give you good advice. Get a referral from someone you know who has had a good experience with their lender.
0 votes Thank Flag Link Thu Jul 28, 2011
Always do some comparison-shopping, who ever gives you the best options and what you are looking for, is whom you should use. Start with you local lenders and request a referral for a Broker. They are all competitive and rates are at their lowest. You cannot lose.

Good luck!

Lucy
0 votes Thank Flag Link Thu Jul 28, 2011
Looking at my own banks interest rates and the wholesale lenders rate sheets, I feel that is a pretty competitive offer. Even a quick search of some of the bigger named banks reveal the same. Rates usually are in .125% increments, so you may see +/- .125% out there. Granted there could be the needle in the haystack lender offering .375% lower in rate, but while you are searching far & wide interest rates could be moving in either direction.

Also keep in mind that not all lenders rates move the same amount each day, you may see one lender trying to curb new business (perhaps volume is too high for their service standards) and not improve interest rates as much as their competitors on a day that interest rate pricing is improving... thus if you based choosing that lender because of their lower rates, and later on in the process the rates are the same as competitors you may feel cheated but it'd just be because lenders become more/less competitive depending on when they need to be - and mortgage brokers broker loans to those same lenders so their clients aren't immune either.
0 votes Thank Flag Link Wed Jul 27, 2011
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