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It seems like every bank I've talked to just has it in black or white. Here is our rate today and here is our fees. None of it seems negiatiable the way its presented.
So, if I were to apply to a bank and pay their application BUT decided to float the rate... would that decrease my ability to get a better rate compared to say, if I hadn't paid the application fee yet?
The rates from banks are not really negotiable in a "can I pay 4.25% instead of 5.5%" sort of way. It is usually more like "if you have a direct deposit with us AND our savings account AND agree to a open an IRA here we can shave and 1/8 off the quoted rate...
The fees are pretty close to locked in stone, unless you have you are also a business owner or otherwise connected to the bank on its commercial side they can't really afford to wave too many fees or the lose money on the actual set-up and time commitment to the loan.
A floatdown option is something that makes A LOT sense now, ideally with no additional cost. If you ask nice some lenders CAN and do agree to do it free, or at least have in the past. The fees charged for the application are separate from any they'd charge for floatdown. You want ask BEFORE you pay an application fee, and you should NOT pay any application until you have the lender an idea of your current situation as far as bedt:income, credit worthiness and amount to borrow.
It makes sense to compare fees at least two or three banks and a few mortgage brokers, you can expect some variability on rates (but rarely more than 0.5%) , a bit more on fees ( I have seen differences of about $1000, but more often about a third of that...) BUT MORE IMPORTANTLY, the lenders are less able to BS you if you have information from multiple sources. Best case the various lenders each make some effort to 'compete' on the total package, but mostly they will just lay out the options and make their 'pitch' about why you should choose 'em.
If the fees of one or another are completely out of whack it comes through that these are NOT the lenders you want...
Once you decide to move forward with one lender you should have a very good idea of what the loan will cost and if they charge for floatdown. Then you can pay your application fee and decide if their charge for floatdown makes sense.
In the good ole days of three or four years ago when we bought our previous home we signed up with Lending Tree and took our best rate to Countrywide and they beat it.
We're refinancing now and there was no negotiation.
Hml1976, good to know I am not the only one who is getting this impression. I see a lot of posts about, is this a good GFE ... see, I know they all have a bit of fluff in them but what can you do about it...
Chet, the bank I am thinking of has quoted me 5.25% (this is for a jumbo conforming) that has blown everyone else out of the water - only one other bank is close, hovering at 5.5%. All other banks are quoting me high 5% thru mid-6%. Even the mortgage broker I was working with say there is no way he can match it. The only problem is at this bank, they say a lock is a lock. They do not even offer a float-down buy in fee option or any such thing. The loan officer said the rate would have to drop significantly, like 0.5% for him to even ask their secondary department (what is that?) to consider dropping the rate and even then it would have to remain above the current market rate - by how much? he didn't say? maybe 1/8? who know - is it really possible to get this in writing since it seems everything is just black-and-white with these banks now... I've heard some commotion about "things changing on Monday -dec.15" so I agree a float is really important in these volatile times...
While banks generally are more set in their fees, brokers often have a bit more wriggle room. While brokers are often able to shop more lenders and able to offer a more competitive rate, banks can often do stuff with niche products that a broker cannot touch. It pays to call a few of each, especially if you educate yourself and are willing to drive a hard bargain.
As far as lock vs float, that is always a personal decision. A float-down usually means the broker/lender/bank pulls the loan from one investor where they have it locked to lock it with an investor offering a better rate. Some secondary lenders offer float-downs to the brokers and banks, but in the back-ground they are often playing the lock game with their own investors. The secondary department of a bank will be selling the loan after it closes and they might lock it with their investor to make sure they get their price or they might be putting a wholesale package together to get a volume break. Banks often keep tight relationships with their investors and it makes things messy when they start pulling files and flipping loans around.
5.25% is not a bad rate on a jumbo. The question is, which scenario is worse for you? One might have you paying that rate when you could have floated and got an eighth or quarter better. Another possibility is the rate goes shooting skyward leaving the rate you could have got as a distant memory.
Of course, you always have the option of going with the bank you like and flipping to another bank if the pricing improves dramatically. I did not know anyone was charging an application fee these days but I cannot imagine it being much. If you have to lose it you can consider it like paying a hedge fee.
Money to lend is not abundant. When a commodity is not abundant, negotiation typically is taken off the table. Add to the mix, smoke and mirrors (ie ever-changing underwriting guidelines) and a move for rate could cost you the approval entirely.
The lock strategy I would recommend for a refi may differ completely from what I would recommend in a purchase situation. But here are some basics that apply to both. State laws may override in some cases:
Appraisal fees: Fees paid to 3rd party to determine the market value of the home. Once spent, not refundable (unless in a rescission of a refinance). Most jurisdictions require the lender to provide you a copy (PROVIDED YOU HAVE PAID FOR IT), however, OWNERSHIP BELONGS TO THE LENDER AND WILL REMAIN WITH THE LENDER. Very few lenders will accept an appraisal in another lender's name in today's environment. Typically, an appraisal in a federally insured bank's name would have the best chance of being accepted by another federally insured bank - but this is happening less and less. Some lenders could try to order a new appraisal with the same appraiser and may receive a cost break, but the ability to select appraisers has diminished, so it's best to consider this an expense that cannot be recouped. NOTE: ON VA & FHA appraisals, the buyer does have control of ownership, but the lender must transfer the appraisal. Refusal to assist w/ the transfer can and will bring problems to that refusing lender.
APPLICATION FEE - Banks typically charge this in lieu of an appraisal fee. If the loan is not approved, almost every jurisdiction requires this fee to be refunded. BC (before crisis) we use to receive automated loan approvals just calling for a desktop approval or a drive-by appraisal. Neither would come close to the application fee collected, a profit for the bank. If you were to receive a loan approval and walked away, the fee would not be returned.
RENEGOTIATION POLICY: Ask up front, but right now profit margins are trimmed so close, a free lock and float down would be rare. And, proving it's free, even rarer. Many lenders commit to their investors they are going to deliver $XX million based upon your lock. The majority of the lenders I have seen, require a 3/8 to 1/2 change in rate (with identical points) before they will consider a renegotiation. Even then, they will not take you to the market rate, or absolute lowest.
My mantra, my chant.....you won't get something for nothing. So how does the consumer get the upper hand? Pre-approvals can only buy you so much confidence, but as the terms change (appraised value for one) each time the approval needs to be run through DU or by the underwriter, that approval can be vulnerable to changing. Plus, some of my pre-approval customers have been trying to buy since last May and have gone from 0 down to now, 3.5% down. (Foreclosures are another animal altogether). I am all for pre-approvals, but not for the next controversial strategy: dual applications.
DUAL LOAN APPLICATIONS: loan application w/ two different lenders, and I think it really only makes sense in a purchase, under contract situation where time allows. Any duplicate fees should be considered lost. Basically, you would lock w/ one lender and float with the other. HOWEVER, this may hit a bump if both lenders lock w/ the same investor. So, to be successful, you would need to research who sells their loans, who holds them to map out a strategy. If I know a customer has double app'd me for interest rate reasons, I am very up front and tell that customer I will have to assign their file to a junior loan officer as I feel it's unfair to my other customers that have committed to me. The amount of time and energy, the amount of advice above and beyond I put into each file is the reason I am on my second generation of repeat customers and this is after changing banks 3 times in the past 10 years. (In some cases, I actually recommend double app'ing for underwriting reasons - and that is different in today's market). And this is not a pompous attitude, I know many loan officers that have been doing this for a long time that feel the same. This is the most important investment many will make. Work with someone that is going to give your transaction that respect. Saving yourself that 1/8% to 1/4% in rate gets real expensive if the loan officer giving you that advice costs you thousands by being bad advice. Suddenly, that $20 a month savings is no longer the bargain it once was.
So, seriously, what to do? First, do your shopping when not under pressure......like under contract. Call around to a couple (a few) loan officers with a hypothetical transaction. How long does it take for the loan officer to return your call? Can you understand the loan officer on the phone? This goes beyond ethnicity, does he/she speak your lingo? Talk over your head? Welcome you to ask questions without making you feel like the village idiot? Do they offer variables in your situation (you could do this if..........., or if you were to pay this off, you could..........)? How easy are they to reach via email? Do they reply quickly? Do they welcome your call or email or treat you as an interruption? Do they tell you you may want to wait for X to happen? Do they offer a free pre-approval? The trend here is trust. Identify trust before it's critical and your chances for a smooth transaction have increased. One of my long-term clients once told me he chose me because in our first telephone consult I told him if it were me, I would not refinance at that time, yes, savings were there, but I could see the situation improving in the not so distant future. Pick your reason....a loan officer isn't for life, but you want someone that will treat you as if they will value a lifetime relationship.
Money is objectively shoppable... Loans aren't (sorry)
Well, I've gone through the whole thread of responses so far... and I have to say, while the intentions are sincere, all the wiggling & waggling to try to "get control" is futile, in the end.
Even the "Squeeky-Clean A-Paper Perfect Borrower" will almost ALWAYS pay too much (FAR too much) in interest over 5+ years when they try to DIY, and/or "rate-shop" among retailers... simply because the general consumer usually is completely ignorant about the time value of money and the effects of structured leverage over time.
Imagine you've been in a car accident and need a personal injury attorney to go to bat for you and get you the best settlement you can possibly win.
What are you going to do? Open the yellow pages and start asking attorneys for "written quotes" of not just what their fees will be, but the amounts of rewards they would "promise" you could get?
Of course not (besides the fact no law office would even participate in such a silly exercise.)
Real estate financing is a navigated process, not really all that different from heading down the legal path of attack to regain a compensatory judgment for injuries and damages. SURE... there are general formulas for what the ballpark guesstimations SUGGEST you can count on (in rewards... or in rates/fees on loans...) but in the end, there are too many variables to specifically define in advance EXACTLY what you will end up with.
How well you end up is significantly due to the expertise and character of the professional you select (and NOT that person's firm, or their advertisements.)
Does this make it DIFFICULT for consumers, in reality? It sure does!
Is it an inescapable reality anyway? 'Fraid it is... sorry.
Will the new "Shoppable GFE" to be introduced in a year change that reality? Not one iota.
Choose your provider according to preliminary "quotes," And you've simply chosen the most successful Liar.
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Money is objectively shoppable... Loans aren't (sorry)
