Questions - getting out of locked rate through broker (loan, pre-approval, credit card)

[helppls]

What does it mean to lock in a rate through a broker exactly? Here is our situation:


We’ve been talking with the same broker for over 2 years now. Yes, we’ve been looking for that long and there has been offers that have fallen through. He is a nice guy and has been helpful in getting us pre-approval letters whenever we needed one.

Last week, after the rates fell enormously, we went into his office and signed some paper but told him we were going to wait and see how much further the rates would drop. Well, the next day, the rates he was getting were unexpectedly higher and so out of fear, he convinced us to lock in a rate even though we didn’t have a executed contract (awaiting seller as he is out of the country) which is good for 45days.

Well, we are told we will get our executed contract tomorrow and so I’ve been calling banks today just to check and I’ve found a bank whose rates is 0.25% lower than the rate he locked us in. Now, on a loan amount of 550k, this is quite a bit of savings and an additional plus, this bank pays for their own fees approx. $2000 savings. This is a large known bank but I know this bank does not participate in the wholesale program...


After a slew of calls to various banks, I have to say, I almost get the feeling the wholesale mortgage program is not looking very good. I think they are getting rates that are much much higher than what bank are directly quoting me...
My question is can we walk away from the loan that our broker supposedly locked us in? Will there be fees for doing this? I don't know if it was a complete contract - obviously we did not have an executed contact but my husband did pre-sign some forms. I expect we might be out of the broker’s fee and maybe the bank’s application fee (even though we did not put a real application together?) What else? What are your thoughts?

I feel bad for doing this since the broker has been very nice but this quite a sum in the long run. Per the amortization schedules I’ve been looking at, its approx. 30k in interest savings over 30 years.

[sneezecake]

Your broker should have multiple banks. A lock, assuming you didn't pay any fee or sign stating you owed any money, is breakable and he should be motivated to re-lock you with the best rate at any time.

He's been loyal to you so I'd say to give him a chance to earn your business with the caveat that he's getting essentially first right of refusal, but if he cant earn it you are prepared to go elsewhere. Paint this as a courtesy and full disclosure, not a threat...he will understand your position.

[helppls]

Originally Posted by sneezecake

Your broker should have multiple banks. A lock, assuming you didn't pay any fee or sign stating you owed any money, is breakable and he should be motivated to re-lock you with the best rate at any time.

He's been loyal to you so I'd say to give him a chance to earn your business with the caveat that he's getting essentially first right of refusal, but if he cant earn it you are prepared to go elsewhere. Paint this as a courtesy and full disclosure, not a threat...he will understand your position.

Unfortunately, I think I remember seeing DH sign a form with two fees on it - the broker's fee and I think the bank application fee. We pre-signed because we were waiting for rates to drop the next day and then we got caught up in the anxiety when the rates rose the next day instead. We are prepared to pay the cost of these fees as $800 lost pales in comparison to $30,000+ over the years with a lower rate. BUT will there other charges?

Of course we will give him the opportunity to find a better rate for us but I am not sure if he can do that if we are "locked" with this one place. We want to give him the business if we can but honestly, I just called another bank (Bank Z) and they also quoted me the lower of 5.5%. However, when I emailed him for an update of, he told me the same bank (Bank Z) is mid 6%.

Like I said before, maybe bank are trying to drive out the mortgage brokerage business? Maybe brokers have no choice but to quote these high re-sale rates because there is a hugh difference in the rate a Bank Z has quoted me directly and what my broker is sayin Bank Z's rate is through him...

I have to look out for our own interests, no?

[sneezecake]

Definitely look out for your own interests.

A "lock" with a broker just means he's locked you with one lender. He probably has dozens he can go to...so, if you locked at rate X and the rate today is rate X-1% then he should be able to very simply lock you with another of his lenders offering the best current rate. You can be locked with two lenders at once through your broker legally speaking...he may just not want to do this.

[helppls]

So it doesn't mean he has actually submitted an application to the lender yet right? I'm wondering if the option exists to withdraw it since we are still awaiting the executed signed contract and only pay his broker fee...

I will ask the broker but I am not confident that it will be well-received (since business seems to be down.) Seriously, he said all the rates in on his desk today was MUCH worst than the 5.75% he locked us in. well, I'm finding the opposite since I've called two (large national/global) banks and they both quoted me 5.5% today...

Now, we are self-employed and have been since 2001 as our accountant can attest. Last year, 2007, was a stellar year - this year not so much but still better than 2006. Our broker has assured us we are ideal candidates, "shoe-ins", despite what I've heard about banks being wary of self-employed people. This is my only concern with maybe going directly to a bank. I've heard brokers help grease some wheels? but maybe we don't need it?

If we get a commitment letter from a bank, is it pretty much guareenteed that we'll get to closing? Meaning is there any point, or is it even possible, to perhaps leave our application with the broker and also placing an application with one of the banks quoting us 5.5%? Just in case our self-employement status becomes an issue with the bank?

[Daddys///M3]

I would like to point out that what is offered over the phone vs. what is approved via an automated underwriting decision and verified documentation are 2 completely different things. Not saying the bank LO is not being upfront, but be aware that the bank LO may not have all of the pertinent info that your broker has. This info may include things that would incur pricing hits. Of course you have to do what makes he most financial sense for you and yours.

[helppls]

Daddys, we have ZERO debts - no car loans, no student loans, no credit card balances. Nothing. Is there anything else you can think of that would incur price hits?

I assumed if we locked with one of the two banks I spoke to today, we would get the rate they told us. I disclosed everything over the phone - our 3 credit scores (v. high scores,) no debts, etc. Is this not true?

Also, does it make any sense to apply for two loans? Do people ever do that? I see from you title you are in the industry. Can you confirm my suspicious that banks are giving higher rates to wholesalers? or dare I think that my broker is being *that* greedy? I haven't though the latter because the % difference has been too great!

[sneezecake]

We just closed on a new loan last week.

We had, for a time, two brokers working our file (known to one another) and had two applications submitted and approved for the same property. In the end we chose one and let the other one go...the only cost to us was reimbursing the cost of the 2nd appraisal.

[chet everett]

In my experience the various rates that were / are offered through brokers (the wholesale rate) and the direct lender's retail mortgage offices do in fact "see-saw", though more often by about an eight, not a quarter. I assume they do this to keep a balance between their own crew and the brokers -- sorta like balancing a workforce with full timers and contract help. Similarly direct lenders that want to build their broader customer base often will shave an eighth for borrowers who consolidate banking and/or brokerage accounts...

In this market I think it extremely important to get a float-down, ideally
no cost, but depending on the size of the loan, it makes sense to pay for it, that way if rates drop you are not feeling stupid.

You seem to be having some 'trust issues' with a mb that seems to have otherwise been willing to work for you. Let him know that. Bring along the paper from the banks, even if that means physically going into the branch and asking them to print off something from their screen on their letterhead. If he pulls out a fax from his wholesalers with rates .25% higher the trust issue is easily resolved. If not...

No real need to apply for multiple loans, sort of throwing applications fees down the toilet, just get a couple of mortgage brokers and /or direct lenders actively aware that only ONE is going to get paid and the BS factor drops off considerably.

Originally Posted by helppls

Daddys, we have ZERO debts - no car loans, no student loans, no credit card balances. Nothing. Is there anything else you can think of that would incur price hits?

I assumed if we locked with one of the two banks I spoke to today, we would get the rate they told us. I disclosed everything over the phone - our 3 credit scores (v. high scores,) no debts, etc. Is this not true?

Also, does it make any sense to apply for two loans? Do people ever do that? I see from you title you are in the industry. Can you confirm my suspicious that banks are giving higher rates to wholesalers? or dare I think that my broker is being *that* greedy? I haven't though the latter because the % difference has been too great!

[lscalder]

Just talk to your Broker more then likely he can beat the retail lender.
Let your Broker know you got a quote for 5.5%