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If she is making a lot of money per transaction, maybe she doesnt need your business
It is good to have experience versus someone in the business for 1-2 years. They might offer you a better rate, but if they mess it up and the loan never closes... the rate really doesn't matter much. Not saying you should pay crazy amounts (like 6.375% versus 5.75%) but always factor in experience and service and see the VALUE of what you are buying.
You can always find a cheaper contractor or plumber... but if its someone 1 week on the job is it worth it? 25 years expereince is great, but no one should ask for your trust they should earn it by answering questions and providing you the information you need.
Not providing the required documents (GFE to start and a TIL), especially when a customer requests it is a huge red flag. Collecting application fees or any other charges prior to closing is another. Yes we do have to do a lot of free consultations for people that do not qualify or that sit on the fence, but its part of the service.
Never pay a large fee or listen to arguments that you should not shop around. If you feel the person is not serving your best interests or the fees are too high, SHOP!
If they avoid answering your questions about APR, pre-payment penalties (check to make sure the 5.75% isnt including one to get the rate lower) or other terms.... it means one of two things.
1) They do not know the answer. You would be surprised how many loan officers in this state have no education or training in finance. Bank loan officers have no licensing or education requirements at all, they are exempt from the NC mortgage act that protects consumers (huge loophople, dont you think?) and many brokers only meet the minimum standards which are very, very low.
Some loan officers that need licenses do not have them (could not pass the multiple choice exam, have prior financial crimes or credit <550). Always check them out online at the NCCOB website, they have a search tool to look up licenses and any disciplinary actions. There are a lot of bad players that jumped in this for the money alone. Money is important in any job, but we (should) have a responsibility to our clients as well.
2) They are avoiding the question becuase the answer is not pretty. The APR is huge, there are penalties or there are other factors you should "not worry about", until of course you have a problem. Then we get calls from consumers that are in ARMs, have pre-payment penalties or other problems that were not disclosed and need to refinance or sell fast.
You did the right thing and informed yourself. That is how I had to do it when I bought my first home with 0 experience. That is what actually got me in the business, learning about the process to purchase a home and then seeing how little was explained to the customer.
as others have replied its hard to say if your program is a good one or not, but the rate does seem high with a 1% origination fee.
as a real estate broker i always ask clients to begin their mortgage search early in the home buying process. i give them information on typical costs associated with obtaining a mortgage. i suggest they get at least 3 quotes and then get a pre-qualification and if possible a pre-approval. i also review typical closing costs for a home at the high end in the areas they are looking. proerty taxes vary a lot.
good luck and enjoy your new home.
I have read a lot on this forum about mortages and still not sure if I am being offered a good deal or it is a ripoff. I appreciate your advice but please disclose if you are a broker.
My offer has been accepted on a house in Durham (zip 27713) and I need to get a loan asap. I have been talking to a broker in my buyer's agent office and I have already paid $395 for application fee. I saw on this forum that it sound a bit too much so I want to make sure the whole deal is not a ripoff.
My credit score (middle one) is 695 and I don't have any debt. I am putting down around 5%. Sale price is $439,000 and the loan amount is $417,000 (so that it is not a jumbo loan).
There was a $4000 origination fee that my broker told me everyone charges this and if I don't see it in other quotes it is because it has been taken care of somewhere else mostly in the interest rate. I asked it to be taken care of by increasing the Interest as I am having difficulty with coming up with down payment in a short time.
I have been given the rate of 6.375% for a fixed 30-year which requires a monthly payment of $2601.85 for principle and interest.
There was a $395 Application fee (appraisal, credit) and $250 commitment fee. Mortgage insurance will be $271.08.
Let me know if I have missed anything. I have had a hard time to compare multiple offers mostly because of every broker using different terms and me not being familliar with all the catches.
One thing I like about the loan being offered to me is that I was told I can pay a fee aournd $200-300 and then I can make a payment over $10,000 toward the loan and have the bank re-calculate my monthly payments. Not sure how important this is or if this is a standard thing.
My main question is if this is a good deal or not.
And second question, to compare quotes from multiple sources isn't the most important thing the interest rate and application/commitment fee (fees that go to broker). I should not be looking at PMI, Property tax, Hazard insurance, ... right?
This is from the federal reserve. Takes a few minutes to read this information from a reliable source. It will also make you feel much better and you will be a better informed consumer.
A request to those who are not licensed loan professionals, I ask that you do not make assumptions on rates that other people are quoted as you do not know all of their information ie; credit, assets, income, past payment history, property type, loan to value etc... If you do not have the software to track mortgage backed securities in real time or at least have a daily rate sheet available to you then a statement that your rate is too high or that it is a good rate is made out of complete ignorance. You do not know when the loan officer locked the rate and what the rates were on that specific day. Rates change daily and sometimes during the day. You may see national averages but keep in mind that rates vary from state to state and are advertised for those will stellar credit 720 score or higher and low LTV (loan to value).
Before I get the backlash (that's okay bring it on)True you are entitled to your own opinion but in forums your opinion could hurt the party requesting information due to incorrect assumptions. Especially when dealing with something as important as a mortgage which as we all know is usually the largest investment most people will make in their lives.
Most people should not give tax advice if they are not a CPA, nor should they give medical advice because they are not doctors. It amazes me how many people suddenly think they are "loan professionals" because they have purchased a few properties. If it were a simple process without too many variables there wouldn't be training and licensing requirements in this state. So please if you don't have a license do not give advice based on ignorance.
The difference for brokers vs. bankers (I know because I used to be a banker) is that brokers must disclose the "yield spread premium". This is money paid to the broker (company hiring the loan officer) by the lender for providing them the loan package. If the rate is sold at a higher rate than the published rate then the yield spread premium is paid. (Interesting bit of information-This rule also applies at car dealerships and their financing). This is due to the fact that brokers must cover their own overhead. They do not have a bank paying all of their marketing costs, phone, payroll, so on and so forth. Because of this the bank offers lower rates to the broker "wholesale rates" and it is up to the broker to decide how much they need to make to keep their doors open. 100% commission bankers are also paid this way except that they do not have to disclose it to the customer. W2 employees of banks do not have the option of raising or lowering the rate. You are offered a cookie cutter loan. This is what it is Mr. and Mrs. Jones...take it or leave it.
Usually I have found these loans (bank loans)to be higher rates than brokers after the broker has adjusted for compensation unless they are equity lines of credit. I think the banks do this because they know the customer is comfortable keeping it all in house while they sit in that cozy leather chair they are about to pay for.
FACT - Correspondent lenders and bankers do not have to disclose their yield spread premium...ever!
Basically if you are loaning your own money you do not have to tell the consumer how much you are making from them.
Funny, I had a real estate agent friend and referral partner in Washington state tell me that she thought broker fees were a little high because we received yield spread premium. We did an experiment to prove my point. I offered her a higher rate with no fees (the yield spread premium payed by the lender would have covered the costs and still left me with a nice profit). I told her to call her local credit union that she has used in the past. When she did she found that their rate was .50% higher than mine with no fees and that they were not willing to offer her the "flexibility" of obtaining the lower rate with fees. She then called USAA and I killed their quote too.
Now she understands...banks use smoke and mirrors because they are not obligated to disclose their yield spread premium. She has been a real estate broker for 30 years and knew about yield spread premium but just now found out that her bank has never had to disclose it. Brokers have to.
Would you call this a level playing field? I think not.
Last edited by autumngal; 01-12-2008 at 09:59 AM..
Reason: considered advertising
deuterdu - Agreed, the playing field sure is not level.
1) Bankers do not have to disclose all their fees, mortgage brokers do.
2) Bank Loan Officers are exempt from NC (and most states) license laws, and broker loan officers have to be licensed and educated.
3) Certain loan provisions to "protect" consumers apply to only brokers.
To me, I like the increased education, licensing and scrutiny that loan officers at brokers go through. I think it needs to be tougher - 550 credit score and check fraud are apparently acceptable when getting a license. The education and test are also too easy... I wish they had much higher barrier to entry. Its nice that we want to give people a chance but we have a HUGE influence on the financial future of people.
I think we have seen what low standards do. Banks make loan products and sell them with no regard to suitability or explaining them to consumers. Most times, the loan officer doesn't even understand how the products work.... just how to sell them.
We have also seen enough loan officers lose their license and then jump to banks, where they do not need a license to operate. There will always be a bank that will hire them for their "experience", network and pipeline without regard to their history. It happens here in Raleigh and everywhere else.
A level playing field is a start. Raising the standards would be even better.
deuterdu -Thanks for your reply but I do not agree with you saying people should not give advice if they don't have a license. I will listen to anybody's advice as long as they can back it up with facts and some common sense.
Also I disclosed everything about my situation and my broker doesn't know anything that it is not mentioned in my post here. Also I am asking if the rate I was given is still a good rate. We all know the rate changes all the time and that is why I am still shopping for a better rate. My broker had told me that she will give me a better rate if she ever gets a rate that is a quarter of point better than previousely locked rate. When somone says Your rate is high that means they think I can get a better rate right now. Not tomorrow or not yesterday and that is not out of ignorance.
I have talked to many brokers after making this post and none of them asked anything that was not mentioned here and they all gave me a Good Faith Estimate.
1) Bankers do not have to disclose all their fees, mortgage brokers do.
2) Bank Loan Officers are exempt from NC (and most states) license laws, and broker loan officers have to be licensed and educated.
3) Certain loan provisions to "protect" consumers apply to only brokers.
Bankers play with their own money.
Brokers play with someoe else's.
Bankers play with their own money.
Brokers play with someoe else's.
Moderator cut: removed Most banks sell their loans on Wall Street or to Fannie Mae and Freddie Mac, same as brokers do. .
Even if it was "their own money"... in the end it is the money of the people that deposit in those accounts. That money is insured by the FDIC and the government therefore has an interest in how it is lent, as risky lending practices can result in a government bailout (recall the Savings and Loans ?).
Banks are required to abide by the same SEC rules as everyone else on investments, why should they not be subject to the same mortgage laws? Whether it is "their own money" or not is immaterial as its the CONSUMERS that the laws are meant to protect.
I doubt that NC regulates brokers because they are worried about the poor banks money. They worry about consumers being overcharged, uninformed or decieved by loan officers.
Are you saying bank loan officers should not be subject to the same credit, background and other checks used to make sure we keep bad players out of the industry?
There are already enough people with 500 credit and fraud convictions in this industry. Anything we can do to keep them out, instead of having a safe refuge at banks, is a good step I would think.
Last edited by autumngal; 01-12-2008 at 10:00 AM..
Reason: it's considered advertising
But the main reason I posted here was to learn more about mortgages (not shopping around for one). I have found out that recognizing a good quote/lender from a bad one (or one that is not very honest or competent) is not that easy and it looks harder and harder as I learn more.
Can someone please explain how should I interpret APR? I have a quote with 5.75%interest rate and the Truth in Lending shows a 6.884% APR. The dollar amount that credit will cost me is also looks high to me ($562,717 for a $417,000 loan). I thought for the type of loan I am getting it should be closer to the loan amount.
Last edited by autumngal; 01-12-2008 at 10:01 AM..
Reason: previous post removed
But the main reason I posted here was to learn more about mortgages (not shopping around for one). I have found out that recognizing a good quote/lender from a bad one (or one that is not very honest or competent) is not that easy and it looks harder and harder as I learn more.
Can someone please explain how should I interpret APR? I have a quote with 5.75%interest rate and the Truth in Lending shows a 6.884% APR. The dollar amount that credit will cost me is also looks high to me ($562,717 for a $417,000 loan). I thought for the type of loan I am getting it should be closer to the loan amount.
In comparing loans for the same length of term, in this case 30 yrs, it gives you the actual interest rate you would be paying for the loan including all fees associated with the loan. Lower the APR, the better the deal.
For eg: if you have three quotes
Interest rate of 5.75% with an APR of 6.884%
Interest Rate of 6% with an APR of 6.75%
Interest Rate of 5.75% with an APR of 6.75%
The second and third (they are the same) is the better deal because the APR is lower than the first one. But that does not mean that the loan officer can't pull a fast one by changing the GFE or the APR at closing, illegal or not.
Ask your lender to give you the loan at par or below(interest rate) with you paying all associated lender fees at closing, including the buy down. This is generally the cheapest loan and you will see that the APR is generally a lot lower, unless the loan officer tacks on additional closing fees to make his day. The downside of this is that you need more cash (to meet the closing costs) for the transaction and the break even point generally ends up being about 40 months. But I see that you are short of money so this might not be an option for you.
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)True you are entitled to your own opinion but in forums your opinion could hurt the party requesting information due to incorrect assumptions. Especially when dealing with something as important as a mortgage which as we all know is usually the largest investment most people will make in their lives.
I think not.
