Hi guys,

Just wondering what advice/info you guys have for getting financing.

I plan on putting the full 20% down and I plan on getting a 30 year fixed rate loan.

Should I try to get financing on my own through say Redfin's recommended lenders list, Zillow , Lending Tree, or Quicken Loans or something? 

OR

Should I use a lender broker? I know a lady who's a broker but not sure if I should use her? Do these lenders charge an extra fee or some how put an extra bit of percentage in there to earn their pay? How DO they earn their money? Should I use one? Should I stay away from them and do my own scouring and use my own resources to find a loan???

Thank youuuuu!!!!

Edward

Sometimes brokers have lower rates/fees than you can get going directly to a bank; other times, banks might have the lower rate/fees (also try credit unions). Brokers may work with small banks you've never heard of (banks you might never think of going to directly)--a broker might have 50 or 100 banks they work with. You have to contact a bunch of different banks/brokers to try to get the "best" rate/fee structure for you ("best" may be different for different people). We are also putting 20% down on a 30-year fixed, and with no other debt and super-excellent credit scores, we knew that any bank we called would approve us for the size loan we were asking for (I had done a pre-approval already, for almost 50% more than the loan size we now needed), so we could call the shots and pick the bank with the lowest rate/fees structure and the best customer service.

When I called banks/brokers last week, I usually got multiple options from the same bank/broker, and they didn't necessarily match what their website said. Usually a bank can give you multiple rates depending on how much fees you pay, so a single number on their website or on their bankrate.com ad isn't the only thing to judge by (note that even when you refresh BankRate.com multiple times within a few seconds, a single bank may advertise a different rate/fee program, since each bank can do multiple programs at any time).

Note that some banks advertise low rates/fees, but have more "catches" than others. For example, one bank wanted me to pay a non-refundable $350 upfront application fee and a 0.5% lock fee (credited as part of lender fees at closing, but not refundable if it doesn't close for some reason)--the guy on the phone was very pushy. I didn't like the idea that he was trying to push me into making a decision without my understanding exactly what he was selling me...he kept saying that I needed to decide *now*, so as not to lose the temporary special rate. Obviously, I know rates/fees change constantly--my loss if I lose out on something that really is the lowest. Still, I waited because it just didn't sound right (especially since he was the only one who wanted money upfront), and, sure enough, the rate ended within a half hour. He called the next day saying the low rate was reinstated, again "limited special". I still wasn't sure...after getting more info from him, I eventually found that the total fees [not everything was included in the low fee quoted previously] were much higher than he originally seemed to be claiming (and therefore higher than other banks/brokers I had talked to)...he also took three tries to give me a correct Good Faith Estimate to match his claims (he said the first one was correct, but I did the calculations myself, and he finally acknowledged that *I* was right...he sent a second GFE, then five minutes later sent a third one saying he miscalculated *again* [went from calculating too high, to calculating artificially low, and then finally correct--but the "correct" was still higher than other banks]. I was still trying to decide, when he emailed that the rate had ended again. I replied saying that I wasn't interested anymore, anyway, and I said that I didn't like that he tried to push me into making a decision. He replied and apologized, claiming, "I'm sorry. I didn't want to appear pushy. I was truly trying to help!!!" (three exclamation points were his). He just didn't seem very professional. I was happy I had waited and wasn't stuck dealing with this guy. (And, as of now, my rate will likely be the same as what he had had, but I'm paying lower fees than he wanted, with nothing upfront.)

I ended up with a choice between two lenders that had basically equivalent rates/fees (difference of $30-$50), and both seemed to have good customer service. The person on the phone at each of these two companies asked, "What do I need to do to earn your business? What questions can I answer for you?", and didn't try to push me into anything without understanding it. The "What do I need to do to earn your business?" question was pretty much the first thing the one guy asked me--seemed focussed on me, not on getting $350 from me. The person at each of these two companies answered my questions clearly and promptly by phone and email. When I was comparing rates that day, I had the purchase-and-sale agreement accepted and wanted to close quickly (this was August 13, and I wanted to close by the end of August, if possible). Both said they could do it. These two companies both sounded genuinely interested in my business and making me a satisfied customer, not just in bamboozling me into something I didn't want. So, it came down to a toss-up between the two. I ended up going with the somewhat more local guy (out of state, but only writes loans in that state [neighbor state to mine] and my state). (He's the one who started out with, "How do I earn your business?" He always said, "Thank you for your business." and "thanks again" in his emails--seemed very appreciative and personal.) It's a small company, but I figured that meant he'd give me good service because every loan counts more. When I emailed to the other guy (across the country) to say that I had picked someone else, I explained that I liked his attitude and that I thought he'd have done a good job, but that it came down to a toss-up. I told him I'd call him again if something changed, and, even though I hadn't picked him, I could at least recommend his name as someone who was good to deal with (unlike the other bank above who tried to push me, yet couldn't even calculate a proper GFE). I couldn't vouch for the actual process of closing the loan with this guy, but at least I could recommend the guy because he gave me a positive upfront impression about himself and his company. He replied back saying he was disappointed, and that he appreciated the explanation of my decision. His response (and his entire communication with me over two days) was much more professional than the pushy guy from the other bank.

So far, the broker I chose has been good. He's been in constant touch. We had to work through an inspection issue first, but now we are ready to go. The bank has approved our finances, and just needs to get the appraisal done. They will be doing a "drive-by appraisal", so it should be quick--no need to make an appointment with our agent to get inside the house. There's basically no question the appraisal would fail--it's a low-priced house, only because it is small and hasn't been updated since built in 1982. It's a large lot, so the land is worth a good chunk on its own. So, we still expect to close by end of August.

I can give you the name of the guy I didn't go with, if you wanted to try him (he does work in California). The broker I chose doesn't work in California.

Good luck! Comparing the different rates/fees is certainly a pain, but I think I ended up with a good deal, with good customer service [good service is certainly important, especially if you want to close quickly!].

Going with a broker who can find you the best deal among many lenders is definitely the best scenario. But you have to find that broker. There are brokers out there who will just gouge you. Also, even if you contact a bank directly, the person you talk to may be paid like a broker rather than an employee.

It's better to compare the loan itself. There are basically three pricing variables about each loan: the interest rate, the points, and the fees (for a standard 30-year fixed). The lender/broker make their money by adjusting those three things. If you get a great deal on any two, expect to pay more for the third. Or, for a really bad loan, you'll pay high for all three.

The "APR" that lenders are required to give you takes into account of all three. That's the best way to judge how good a loan is. However, there are other considerations. For example, if you are short on down payment and reserves, you're better off paying a higher rate for lower fees and no points. If you have the cash up-front, and plan on holding the loan for awhile, it's better to pay some points/fees and get the lower rate. If you have to choose between paying points or fees, pay the points, because it's tax deductible just like interest. In this buyer's market, you may also be able to get the seller to pay some of your points and fees.

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Anteater wrote:

 

The "APR" that lenders are required to give you takes into account of all three. That's the best way to judge how good a loan is. However, there are other considerations.

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The only problem with comparing solely APRs is that each lender calculates APR differently, because the rules for calculation are not clearly defined. My broker included a printout of the following article with the loan package that he sent me:

http://www.mtg-net.com/sfaq/faq/apr.htm

Thank you for the shared experience/advice, Blueberry -- Thanks as well, Anteater.

I'm just not sure if a broker is going to have my best interest and if I can trust a broker. I think I learned that brokers get paid by the lenders -- I guess like a commision or something. Maybe then, the broker will limit me to those lenders who pay better... making me lose out on the best rate possible. Is that how they get paid? by the lender? I think that's it at least. Is it like a commision or something? Do the borrowers ( like us ) end up paying more for a loan by using a broker?

I suppose I could scour myself through the noted sources in this post and find one myself -- but if a broker can find an even better deal I'll go with it. I'm just not sure, for certain, which way to go. It's a big decision -- thanks again in advance for the advice = )

Edward

I have a friend who has been investing in real estate for a decade. He has around 20 rentals nows. For many years he swore he was getting the best rates by using brokers. But when this financial crunch hit he found that the brokers didn't have as many options and that using a direct lender has been much better recently.

He says that if you have unusual circumstances then a direct lender can better evaluate your situation and make exceptions where a broker just puts together your application and may not have the flexibility to help out beyond that in todays situation. He feels that right now rates are about the same between brokers and direct lenders so he is better off getting the service he needs directly. The last loans he got recently were through Wachovia at Newport Center Drive in Newport Beach. I am not suggersting using them, just letting you know what he did and was happy with.

For myself, I have spoken with brokers and direct lenders but not sure who I will go with yet since I still have not had an offer accepted. My contacts have been with Wachovia, Countrywide, Amerisave.com, and a couple small local brokers. But I will need to look at everything when the time comes.

Thank you, TrabucoDom -- for the insight = )

The best thing, perhaps, is to do both. Hire a broker, let them get to work finding financing, and at the same time I'll do my own homework and go with the best. 

Regards,
Edward

YSP, otherwise known as Yield Spread Premium.  That's one term you want to be very familiar with, and make sure you understand it completely when it comes to brokers, as that's how they get paid.

If a broker will explain YSP to you in a manner that makes sense to you, hang on to that broker!

Trust is everything with a broker, mine happened to be to the step son of a co-worker, and he explained everything to me, took the time to make sure I was comfortable every step of the way.  Do your research, but don't try to pit one broker against another.

I started with Brian over dinner.  True, I had spoken to him when he was putting together his future step father's loan, but we didn't really know each other.  So, we went, met after work, and filled out a lot of paperwork (some he had e-mailed to me and I had filled out previously) and we talked for like two hours.  Throughout my process of looking for my home, he was right there to answer questions, to make sure I had the information I needed, to write up my GFE's and anything else I needed.  He was there for my dumb questions, and made sure that I was comfortable.

He explained the YSP to me, first night in fact, with a comment of 'Do you know how brokers get paid?  Would you like to know?'  Then he explained YSP.  Don't ask me to repeat it, but when I saw the money he was making, it was like 'Okay, this is fair.'

If you can find a broker that you feel comfortable with, stick with them.  Brokers have access to a variety of services, whereas a traditional mortgage lender may not find you the best value, because it's not in their interest to.  As for me, my rate was the same at any of the lenders he looked at.  All the lenders are looking at credit scores, downpayments, type of loan, etc.  Don't expect anyone to be that much different.

Regards,

Gary