It's funny. My mother & father are pretty good with finances, they have a ton of equity in their home and a pretty wide array of money in retirement, stocks, etc. Yet, when it comes to mortgages, they are like most people....they don't really understand them or how to shop for them. About a year ago, they were talking about refinancing and since my firm isn't licensed in the great state of North Carolina, I could only really advise them accordingly. When I mentioned looking not only into their bank, but to a Mortgage Company as well....my father scoffed. Now usually when my father scoffs, that means I'm doing something wrong. I won't get into all that since I'm now reformed and darn near an angel these days:) The conversation went something like this.....
Dad: "Why would I go to a Mortgage Company when I can just go to my bank?"
Me: "Well, often times you'll get a better deal."
Dad: "How's that, they are a bank?"
Me: "These days mortgages aren't necessarily their forte. Besides, mortgage companies tend to be able to get folks like you wholesale rates, which means a cheaper interest rate."
Dad: "Yeah, but the closing costs are so high."
Wait, stop! I'll end it right there. A fellow Active-Rainer (The beautiful & poetic Jennifer Bukaty) had a similar situation with a client who was shopping and had it narrowed down to her credit union and a local Mortgage Company. Jennifer had asked me about it and gave me some rough quotes from the two institutions. Here was the synopsis I emailed her back after quickly crunching the numbers:
Contestant #1....The Mortgage Broker:
Loan Amount = $222,000
Interest Rate = 5.60%
Total Fees = $1650.00
Principal & Interest Payment = $1274.46
Contestant #2....The Credit Union
Loan Amount = $222,000
Interest Rate = 5.85%
Total Fees = $525.00
Principal & Interest Payment = $1309.67
She would save $35.21 a month going with the Mortgage Broker, though she's paying $1125.00 more in fees for the privilege. It will take her a little less than 3 years to recoup the costs. So, it all depends on how long she plans on staying in the house. It should also be noted that she would pay more on the principal with the lower rate...not a heck of a lot, but some. Both are very good deals, she should know that. This is based on $90,000 down, I'd recommend keeping the other $5,000 and have it as reserves (money in the bank) in case something goes wrong with the home.
Given the numbers and what she was looking to do now and down the road, the customer decided to go with the Mortgage Company. It's a new age folks and keep one thing in mind.....all Mortgage Companies do is mortgages. That's their expertise. They don't dabble in investments, personal loans, car loans, etc. They have one area of expertise and that generally translates into better service and products for consumers.
All that said, there are times when Banks, Direct Lenders, or Credit Unions may have the better deal. Anyone who tells you different is probably not telling you the truth. At the same time, give a reputable and/or referred Mortgage Company licensed in your area a chance. In the end, it will ensure you have your best interests at heart.
Always smart to shop around no matter what the product. Good post.
Ross Quintana - Spokane Washington Realtor
www.TeamQuintana.com if you would like to link exchange visit my site and we can link up
Its nice to have someone who can actually break the numbers down and do the analisis..most only look at the initial interest rate...I have a software package that does this analisis..its good for up to 4 comparisons on one screen...But I guess thats only good if you can get 4 quotes in the same week!!
Great post..jason..and I love your button
Lynn - Agreed, though you don't want to shop to much and have everybody and in their second cousin looking into your credit. I typically recommend checking into 3 different entities.
Ross - I always like to say there is no such thing is a free loan...check that.....it's called a grant. I can't compete with grants:-) I agree that I don't push people away from their bank, that's not in the client's best interest either.
Marc - Hey amigo! There is no substitute for smart shopping.
Matthew - Not seen the ball since kick-off, I like that! I don't like that it's done, just the saying:-)
Mike - Shoot man, I could use that software. I'm sitting here with charcoal and a rock;-)
Mr Jason, well done and easy for Joh Q Public to follow. It really comes down to how long you are going to stay in the home.
Oh and those 2 nice cold beers from Colorado will be on the way soon. Just as soon as the freaking snow stops.
Great example Jason...I loved how you broke down the numbers for Jennifer's client. Next time I need numbers broken down can I send them to you : )
Joe - Thanks and you are right there. So many variables come into play when making an educated choice...the one best for each individual situation. Looking forward to the beers, wait....I don't drink...at least if Mom & Dad are reading:-)
Sandra - I charge by the hour you know, lol.
As an educator/consultant in the business, I give too much information sometimes. I need to dole it out a little more sparingly so I am not creating "junior loan officers" who can shop the whole world over.
well Sir that was a very informative post. Written in terms that are easy for the "public" to follow.
good job
Hey Jason,
I've found in comes down to the individual loan officer vs broker... I have able to succeed most of the time due to experience and building a relationship with the customer... rate vs closing costs... three years to balance out... in Wisconsin the average buyer stays in their home 5.7 years, how often do they refi? Relationships aree the key to getting and keeping our business.
Rich - That's a point well taken as well. I would think they would appreciate the education and information and be loyal to the Professional who is honest & upfront with them, but that's so not the case a lot of times.
Dez - You know me, Mr. Simple:-)
Rick- Nice pic man! Interesting point, it is about the Individual Loan Officer as we set the barometer on what is a fair price for our service. I've saw some individuals who do little in the way of volume and end up pricing themselves completely out of the market.
I'm still jealous of your button. :(
Very true, best for people to shop. I do use a banker here for international buyers, physicians, she can do portfolio and in many cases that is what is necessary. Thanks for breaking it down. One thing I would add is service, better to pay a few dollars more and make sure it closes and the lender's underwriters have money.
Mike - So, it's so easy a Norvelle can do it:-) Ok, that was cheesy....I need the software!
Missy - Ahhhh, the intangible...service. Absolutely, as a consumer I love when somebody returns my call and I can get through to a live person. Attending closings is very under-rated as well.
Sis - Back at ya hun!
Bryant - That's a fact. And when doing the comparison, you won't always be the cheapest...but at least they know and have that option.
Danny - That's only part of what we do my friend.
Sandra - Not to worry, I'd be happy to help if you ever would want to run something by me.
I'm just fortunate that I get your first rate services for free ;-)
Seriously, this breakdown you generously provided for my client made all the difference to her. Simply because she was able to see that the initial numbers that customers focus upon didn't pan out to a better deal for her in the long run. It's NOT simple. And it's definitely not as simple as the rate implies. Every single client should have this scenario run for them. Anything less is a huge disservice. This particular client is a money manager and had I not asked you for this help, she would have held me responsible down the road when she figured it out.
Thanks again for this Jason - she made the right choice because of you :)
Jennifer - Thank you my dear.....always my pleasure! While we are giving hugs, a big one for you!!
Dan - If you choose option two and have that extra green stuff that makes this world go round, I highly recommend you invest it in the International Bank of Jason Sardi. The dividends are great and you are guaranteed to be entertained. In the long run, it's cheaper and more economical than HBO or some of those other pay channels I hear you 'invest' in.
Janet - Isn't it? Mike Mueller is the man!
Sandra - No sweat. Bring a leash the next time you take Dan visiting posts:-)
Jason,
My first is and has always been through Countywide...but it was A paper so no problems here...my second is with Wachovia...I prefer and can go directly to the bank...my credit is very high so going direct is the best option for me. Now you better watch out with you two lovebirds!:)
Kim - Good point and as I mentioned above, shopping should be minimized because you don't want too many firms pulling your credit.
Jackie - Thank you and he did:-)
Jeannie - I hope it does, have a great weekend.
Jennifer - Though I'm typically not one for Public Display of Affection, I can surely make the exception for you.
Jason,
You still da man...I have had my loans with these guys for many years and have been happy with them...no BS...either they tell me upfront if they can do it or I walk. I had one deal on a condo conversion I wanted to buy....I was able to get in on the ground price because I knew someone about 3 years ago...but when I did the comps I didn't believe it would appraise...my guy still had it appraised but it was under 600 sqft a studio..gorgeous. I backed out because if I didn't close i would have lost the 20K deposit. But I was told upfront and that is why I stay with this guy...he was honest enough not to just take my money.
Jason,
Great post! I think in the mind of many consumers there is the fallacy that all money emanates from banks!...they don't see other sources as 'legitimate'...the other thing is anyone who chooses a lender based on interest rate alone is nuts!!! Sorry for beating around the bush! Thanks, Fran
Jason,
As a true consultant, I do not quote rates/programs until I have gotten deep into the clients desire to buy or refinance. What does this really mean to them and what is most important to them. Probably 85% of the itme, rate is not it!! If it is, then Ditech or credit unions are the place to go, a loan transaction, cheap, stressful, not a relationshp for life for their financial future. Yes, we lose deals to rates, but then they were probably not a 5 star client, and not a client we would want to work with. Great Post and thanks for sharing about lenders you have succeeded with lately. Appreciate all that share here at Active Rain!! KUDOS
Jason.... good post in regards to what people think of mortgage companies compared to their banks. I will say, that the expertise in a traditional bank is not as high as it would be in a mortgage company. But in all honesty, I don't really care for the example. How about finding out what the bank would have been at 5.85%. This is how you compare the real and true apples to apples. I just did a post on Yield Spread Premiums and this would factor into your example.
Hi Jason...Great post. I actually work for a credit union, so some insight from here would be good.
Credit unions, as a whole, don't do the volume of mortgage business that a broker would. My company happens to be the exception, with a full-service, direct lender model that competes with brokers and the big boys (you know...those companies that are going into bankruptcy and closing their doors?)
It's so true...clients need to look at the big picture and how rates and fees balance out. A good originator, whether from a direct lender or a broker, will find the best combination of interest rate and fees for their client.
While each has their pros and cons, finding that local person that wants your referral business is key...because there's accountability there to do a good job and not get their reputation creamed.
I tend to think the real competition (it's wrong to put this online, I know) is not between local brokers and local lenders, but between LOCAL and some TV commercial, radio ad or website. The farther you are from the person doing your loan, the less incentive they have to keep their word or do a good job.
Thanks for posting this.
Wendy - It sounds like you do business the right way! Thank you and anytime, the sharing of info and knowledge is a vital part of AR.
Jeff - Jennifer's client was looking for the best deal. My understanding was that she got the Bank's best offer and the Mortgage Company's best offer. Those were the apples I was comparing. If the bank comes back and says we can waive these fees and charge you this rate instead, my question would be, "I thought you gave me your best offer initially?" I understand where you are coming from though.
Joey - Wow, I didn't know that. Good to know. You make a good point between LOCAL & TV commercials, radio ads, and websites. I've grown to loathe fine print.
Jason,
Great Analogy and very truthful. For some reason the banking industry has done a great job of convincing the public that their loan is more affordable, when like you said it really just depends on who you are dealing with and the specifics of the situation. Great Post