Home Buying in North Dallas>Question Details

Mathew George, Home Buyer in Dallas, TX

Considering the same mortgage products and options exist out there, why should I choose Lender A over Lender

Asked by Mathew George, Dallas, TX Mon Jun 16, 2008

B ? Bottom line is they work on comission too , is that disclosed ?

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Here is an update from the Federal Reserve Board.
McLean, Va. – July 14, 2008 – FRB issued the release of the Final Rule Amending Home Mortgage Provisions of Regulation Z (Truth in Lending).

The rule requires accuracy and balance in advertisements as well as the establishment of escrow accounts. The advertising rules will protect consumers from deceptive or misleading advertising practices. The rule requires that the lender establish an escrow account for the payment of property taxes and homeowners’ insurance for first-lien loans. The lender may offer the borrower the opportunity to cancel the escrow of funds after one year.

The final rule withdraws the FRB proposed rule’s broker-only disclosure of yield-spread premiums (YSP). The FRB removed the proposal due to “compelling evidence from consumer testing.” The removal reaffirms the findings in two Federal Trade Commission (FTC) studies in 2004 and 2007. According to the studies, disclosure of YSP created confusion among borrowers and caused many consumers to choose more expensive loan products.

So, while HUD-1 Settlement Statements currently show the commission a broker makes and does not show what a banker makes, the new rule removes the disclosure altogether.
Web Reference: http://www.Mortgages-TX.com
1 vote Thank Flag Link Mon Jul 14, 2008
Actually, same-same is true only to a limited extent. With thousands of lender programs out there and given the fact that brokers are typically not set up with more than a dozen or so, there are usually some differences in the products offered by one broker or one banker vs another. Bankers usually have fewer real choices, but they can operate off thinner margins even though they don't.
Brokers can choose from the same banks that a borrower can contact plus insurance companies and various other lenders, often beating the banks, but not necessarily. Total cost is in both the fees that the borrower pays upfront and the interest rate paid down the road.
A lot of people call the costs "junk fees" somehow believing that they're not real. The costs are real -- the question is whether to itemize them and have them paid for separately. A tax certificate showing that taxes are paid, or a flood determination showing whether the property is in a flood plain or not, etc must all be done -- it's whether they get broken out and disclosed and paid for as line items on the settlement statement or get buried in somebody's profit and loss statement.
Commissions seem to rankle some people. Realtors make commissions. Brokers in real estate and in mortgages make commissions. Bankers make commissions. Everybody's commission is disclosed on the settlement statement except a banker's commission. Really, there is nothing wrong with a commission based sale. Most of the business world pays its salespeople commissions or bonuses based on sales. It does prioritize activities according to the size of the house being sold, which seems reasonable.
So, why choose A over B? If there truly is no difference in the cash to close and the monthly payment, then it is your choice -- an arbitrary decision you can make based on who makes you laugh, if you like. But, there most likely are differences in cash you need to bring to closing and your monthly payments. Stop worrying about how much somebody is making off your deal (because they need to make a living too), and focus on what it costs you.
So, if two deals are about the same, you can choose, but wisdom dictates you also should check who is reliable about delivering. Referrals are a good way of finding people who have acted responsibly and reliably in the past. Negative reports are not necessarily a fair indicator of poor performance unless there are a large number of them. Try to read through the hype and select a loan officer you can work with, who hasn't had a slug of complaints or who was referred to you, but choose according to the deals offered.
1 vote Thank Flag Link Mon Jun 16, 2008
Good question! When you are buying or refinancing I encourage you to look at all the costs associated with the loan. Every lender is going to have the typical mortgage fees like: Appraisal, title, underwriting, processing...it really comes down to lender fees when choosing lender A over lender B.

When it comes to lenders (and I’m a licensed Texas mortgage broker) ask the question “what is your ‘no point’ rate.” Some lenders like to offer artificial rates (fake rates) that come with points. They know you will make your loan decision based on rate so they offer them—with fees.

So just ask for their “no point” rate. This way you are looking at the real market rate vs. some lender’s fake rate. If you’d like to see our fees we have a PDF on the front of our website that outlines all our mortgage closing costs. http://www.mylendingplace.com/

We are one of the few “flat rate—no point” lenders in Texas.

Thanks again!
0 votes Thank Flag Link Thu Jun 4, 2009
Hi Mathew,
Lender is a very important part of the transaction process. If the lender is not fast and accurate, you could have problems at closing. Interest rate is important, but fees that you will pay and accuracy are important too. Mortgage company needs to open a title agreement with the title company and get ready all of the paperwork on time. Contact me if you would like to know more about it.

Regards,

Viktor Taushanov
Realtor
Coldwell Banker Residantial Brokerage
972-758-2045 Direct Line
214-697-6797 Cell
viktor.taushanov@cbdfw.com
0 votes Thank Flag Link Fri Sep 12, 2008
Mathew,

Speaking of working with a bank.... we're working with clients right now who have to close this week in order to get the short sale deal they want. We put them in touch with our preferred lender back around Mother's Day who got them pre-approved. They then decided they could get a better deal with a bank who was going to give them a special deal, much better interest rate, no PMI, etc. So great, better deal for them - it's all good.

We repeatedly asked the bank loan officer for a GFE and pre-qual and it was never produced to us or the client. The bank LO followed up 2 weeks later and said he could go ahead and try to get them qualified now and see if they could close in July. If they close in July, the deal's off the table and they lose their home. He then runs the pre-qual and after all, the bank LO can not get our clients the better deal he had promised from the beginning.

So, now about one business week before it needs to close, our clients are back over with our preferred lender with everyone jumping through hoops working to get them closed on Friday to meet their time frame. That's just one example of "life in the trenches" and why it'd be important to choose the right lender.

Hope it helps,
Terri Hayley
0 votes Thank Flag Link Mon Jun 23, 2008
Hi Mathew - choosing a lender that is reliable, trustworthy, and stays in contact with you throughout the process with honest, accurate information is imperative to having a smooth and successful transaction. The best platform that a lender can have in the current industry is working for a correspondenet lender where the processing, underwriting, closing and funding all take place in-house which provides the Loan Officer with the control over the process and the tools necessary to meet your closing date with no delays. This platform also allows the Loan Officer to shop the interest rates with the wholesale servicers on a daily basis so that when it comes time to lock your rate they can insure that you get the best rate for your credit score, loan type and closing timeframe. The majority of loan officers are paid on straight commission based on when the closes and funds so keeping a buyer happy throughout the transaction and earning their trust is the key to building a lasting relationship and referral source. One thing that you run into with a regular bank is that the loan officers are basically glorified order takers and typically paid a base salary. They can only work with the in-house products that particular bank offers and once they start the transaction it is typically handed over to a centralized processing center to complete so the chances of good customer service, timely communications and meeting your closing date become less likely. A mortgage broker is not making the final loan decision or providing the funds on your loan. They are relying on a wholesale underwriting department, closing department and funding department. Typically they have contract processors that work off site so there is not really any control over the process from the loan officer's point which can cause delays in closing and last minute changes to program depending on which wholesale lender they are using. Wholesale lenders are still changing guidelines and tightening programs so if they have it at wholesale lender A and they decide they are no longer going to do the program you are approved on, the loan officer now has to start from scratch and resubmit the file to another wholesale lender. Working with a correpsondent lender who is making the decision in-house and will close and fund your loan with their money will provide you with more certainty that your loan will close on time since if one of the wholesale servicers changes their program guidelines we still have 50 others that we can sell your loan to post funding since we are doing everything in-house and simply delivering the final product to a wholesale servicing center. I have personally worked with all 3 platforms at one point or another in the last 10 years and correspondent lending is the best of both worlds - control over the process to meet or exceed customer expectations and meet the closing date plus the ability to shop the rate on daily basis to insure our clients get the best financing to meet their short and long term goals. Our fees are competitive and our customer service is rated excellent by 99% of our clients and we DO NOT miss closing dates!!! I am here to assist you however you need and look forward to speaking with you again soon.

Sincerely,

Katie Sparkman
Sr. Loan Officer
CMC Home Lending
972-238-7400, ext. 104
0 votes Thank Flag Link Thu Jun 19, 2008
Great question. You can ask them to disclose their commission. Not sure they always do, but you can ask. What I like is reputation of the lender. Ask the title company you plan to close with, ask your realtor. The good ones they'll rave about, the bad ones....well they may not discourage them, but they probably won't have anything good to say about them. I do care about fees and prices as it affects my customers bottom line, but just as important and perhaps more important is their ability and reputation for closing on time at the price they say they will in the beginning. Not closing on time can cost the buyer huge amounts of time, including the entire transaction. How would you like a seller to terminate the transaction, keep your earnest money, and sell the house to someone else because your lender couldn't close on time. You not only loose the earnest money, you loose your inspection money, option money, appraisal money, anything else perhaps you've paid to the lender or your realtor, and you have to start all over again. I'd also like to know the lenders reputation for coming to closing with what they put on their GFE. I've seen plenty have higher interest rates and different loan programs at closing versus what they initially promised.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Tue Jun 17, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
When looking for a lender, the factors to consider are:
1. Rates they quote you and options in that loan package such a prepayment penalty, closing costs paid, etc. If they give you an extremely low rate compared to other people watch out. they could be doing a bait and switch and the rate you actually get locked into will be different.
2. What are the closing costs quoted by the lender. These vary all across the board. Lenders call different items different things so it is difficult to compare one good faith estimate to another. Get your agent to help you if you are having trouble comparing one lenders good faith estimate with anothers.
3. What is the lender's track record for closing on time? The biggest problem a Realtor has in the transaction is often a bad lender who cannot get the documents to the title company in a timely manner. Choose a lender that has in house underwritting. What the lender does is gather the information together and sends it to a clerk somewhere who is really the decision maker as to whether you get the loan or not. If the lender does not have a good relationship with the underwriter, there can be a lot of last minute problems and loans that do not close.
The lender does have to disclose what percentage they are charging for the loan. What a lot of people do not know is that that is not the only place a lender makes money. A lender also makes money by the resale of your loan.

Choose a good experienced Realtor who can give you a list of honest lenders who can close on time!
0 votes Thank Flag Link Tue Jun 17, 2008
Honestly , I am not worried about people making money by doing a job, but I do like clarity and transparency and as long as I am being served well I am more than happy to pay the fees demanded because they deserve it.
0 votes Thank Flag Link Tue Jun 17, 2008
Kathy and Terri,

Thanks for clarifying! Don't end up calling an 800 number but get personal referrals from family or friends. There are lots of great mortgage bankers out there that are not affiliated with a large bank.
0 votes Thank Flag Link Mon Jun 16, 2008
Dr. Mathew,

You'll want to consider experience, customer service and singularity of focus for a variety of reasons. I would be happy to enumerate via e-mail or phone. I wrote a bunch of them up on my computer and just lost them. Some of them know about loan programs that others do not.

Mortgage bankers have in house underwriting which is very important as well. Even though the title says "banker" it doesn't necessarily mean a bank like Chase or WaMu.

Thanks,
Terri Hayley
0 votes Thank Flag Link Mon Jun 16, 2008
Just like anything in sales and account management choosing a lender could have a lot to do with the relationship you spend with your lender. I agree with Jeff that Mortgage Bankers are the way to go. However, that does not necessarily mean large banks! My experience has proven that a lot of large banks do not always provide the best customer service of follow up and I have seen several instances where outsourcing and consolidation of loan servicing has resulted in 3-5 day late closings. If you would like a reference I am happy to provide them. Bear in mind that the better your credit score the better you selection of options.
Web Reference: http://www.HouseHuntDFW.com
0 votes Thank Flag Link Mon Jun 16, 2008
Lenders make their fees in two places... interest rate and closing costs. Choosing the lender with the lowest interest rates and/or lowest closing costs is not always the best deal. When you get close to closing several things could happen. Some examples could be that you could have a successful closing; you could have a delayed closing while the mortgage broker searches for a program that fits what they quoted you; or you could have that uncomfortable call from the loan officer telling you that "you were not approved" for the loan they quoted you but they "have another program at a higher rate" they can close you with. If it is the latter, it is probably too late to change to a different lender because in most cases, you are contractually obligated to close and could possibly lose your earnest money if the seller won't agree to delay closing.

Our best experiences have been with mortgage BANKERS. In today's market it is wise to get referrals from people that have closed loans with the loan (not just the company) officer before you commit to one person and/or company.

The detail of the commission paid to the loan officer is not usually on the closing statement.
0 votes Thank Flag Link Mon Jun 16, 2008
Yes it is disclosed on the HUD settlement, in many instances buyers BELIEVE they are getting a better deal with a lender in fact it cost them more. Matter of reading all the paperwork placing on paper obtaining full explaination from all. Knowledge has power some mortgage brokers I have seen placed the buyer in the wrong program... in some instances the broker can't think of the box to make the loan work. Some brokers don't know how to make suggestions assist the buyer in improving their credit scores knowing how to do a ramp rescore over an issue for a better interest rate.... a Loan officer needs tooo think fast in some instances

I am a Dallas realtor and Dallas home mortgage loan officer notify me if I can assist

http://www.lynn911.com
0 votes Thank Flag Link Mon Jun 16, 2008
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