Author Topic: Mortgage - Important to go with a well-known bank?  (Read 6222 times)

Grateful Stache

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Mortgage - Important to go with a well-known bank?
« on: July 31, 2014, 06:56:59 AM »
First, many apologies if this topic has been brought up before. I did my due-diligence and searched, but did not find any new/relevant information.

How important is it to use a well-known, big bank lender in the mortgage process? We have excellent credit (750+) and 23% down payment.

Current rates (30 year/fixed, includes APR):

Wells Fargo - 4.46%
Local Credit Union (Elevations) - 4.313%
Ditech - 4.181%
Fortune Financial - 4.125%
Sebonic Financial - 4.079%

My question is: Is it safe to use some of the 'lesser known' mortgage companies, such as Sebonic or Ditech? Anyone experience hidden fees? Is there any danger of a mortgage company going into default or selling our mortgage to another company? Do these companies close on time?

Sorry for the multiple questions. First time homebuyer and die-hard mustacian. Thanks for the help and wisdom.

Another Reader

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Re: Mortgage - Important to go with a well-known bank?
« Reply #1 on: July 31, 2014, 07:53:53 AM »
All lenders are required to provide the same disclosures - a Good Faith Estimate (GFE) and a Truth in Lending Statement (TIL).  The GFE gives you the information needed to compare pricing.  Undisclosed lender fees are a no-no.

Most mortgages are sold either to Fannie Mae or Freddie Mac.  The loan is serviced by a bank or servicing company.  Those are the people you send your payments to and who escrow your insurance and property tax payments.  Of the companies you list, Wells Fargo is the only one that services mortgages, unless your credit union also services mortgages.  Weak servicers have gone bankrupt, but it's very uncommon.  With a Fannie/Freddie loan, you will likely get someone that knows what they are doing.  Servicers love to sell you stuff you don't need, so be sure to opt out of the sharing of marketing information or your mailbox will be stuffed with offers for strange insurance products and credit cards.  Servicing contracts are shorter than the life of the loan and servicing companies are often sold.  You may have multiple servicers over the life of the loan.

Ditech used to be the on-line subprime arm of GMAC Bank IIRC.  Their advertising budget during the bubble was huge.  A lot of the on-line brokers are cheaper because they don't maintain retail offices and run assembly line operations.  If your loan is simple, the process runs smoothly.  Not so much if you are self employed and/or have credit issues or the like.  Credit unions tend to be slow in processing paperwork, but it depends on the credit union.  Get some recommendations and shop price (rate, points and fees) until you are satisfied with the lender and the terms.

Don't forget to check PenFed credit union.  They are usually one of the cheaper options.

Cpa Cat

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Re: Mortgage - Important to go with a well-known bank?
« Reply #2 on: July 31, 2014, 08:03:03 AM »
I would just make sure to read everything carefully and go with the lowest rate.

Bigger banks just package up your mortgage and sell it anyway. So yes, there's a risk - no matter who you go with. In fact, you should probably expect it to happen at some point.

I think my mortgage changed hands three times in one year during the recession (the first holder bankrupted, the second one was a bank that failed and then it was absorbed by Chase - and that doesn't count the original bank who gave us the mortgage). It was no big deal. I do not believe I ever even had to change my automatic payments.

Grateful Stache

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Re: Mortgage - Important to go with a well-known bank?
« Reply #3 on: July 31, 2014, 06:27:16 PM »
Awesome, thanks for the advice folks. I'll check out PenFed (turns out you can join simply by providing a 'donation.' Sweet!).

So I assume that even if my mortgage gets sold, there is nothing to fear? All the terms remain the same?

Thanks again for the advice. It is very helpful!

sol

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Re: Mortgage - Important to go with a well-known bank?
« Reply #4 on: July 31, 2014, 06:32:32 PM »
The big banks always have the crappiest rates.  They're the retail version of mortgage lending, and make no attempt to be competitive on price.

Smaller banks almost always can offer you a better deal, and they have more room to negotiate on things like fees and points and inspection costs. 

As for selling your mortgage, virtually everyone does that these days unless you got a really crappy rate.  There is nothing to fear from having it sold, and your choice of bank won't impact the chances of it happening.

What's the worst case scenario if your small bank mortgage holder goes out of business?  They lose all records of your mortgage and you get your house for free? 

electriceagle

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Re: Mortgage - Important to go with a well-known bank?
« Reply #5 on: July 31, 2014, 08:08:24 PM »
The biggest risk is execution risk. As another poster pointed out, the cheapest places keep their costs down by running an "assembly line" operation that may not be prepared for a non-standard situation.

You could end up with delays in your mortgage approval or even a last minute refusal to underwrite the loan. Depending on the market in your part of the country, delays  could mean a risk of losing the deal.

Another Reader

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Re: Mortgage - Important to go with a well-known bank?
« Reply #6 on: July 31, 2014, 08:20:34 PM »
Yes, your mortgage terms remain the same.  You mail the payment to someone else, they manage your escrow account and pay the taxes and insurance (funds are transferred to the new servicer), and life goes on.

escolegrove

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Re: Mortgage - Important to go with a well-known bank?
« Reply #7 on: July 31, 2014, 10:37:26 PM »
I always go with the broker that my realtor is associated with as my experience has found they are the best rate. The funny thing is that they sell their loans to the big name brands. Wellsfargo has all of our mortgages. My parents and friends went through the same program and got chase and pennymac.

sol

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Re: Mortgage - Important to go with a well-known bank?
« Reply #8 on: July 31, 2014, 10:44:46 PM »
I always go with the broker that my realtor is associated with as my experience has found they are the best rate.

My last realtor's associated broker turned out to be the least competitive of the five bids I got.  I took my other bids to her to give her a chance to match the rate and terms, and she flat out told me she couldn't come close.

I figure any mortgage that lots of different people are willing to give me can't be that great of a deal anyway.  You want the deal that most banks pass on, and only one bank thinks might be okay.

jmoney

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Re: Mortgage - Important to go with a well-known bank?
« Reply #9 on: August 01, 2014, 05:15:51 AM »
I guess it really depends where you are from and what kind of property you buy, but here in Ohio the big banks won't do investment property or they will with a million strings attached that effectively made it impossible. You will have a lot more options for owner occupancy.

Grateful Stache

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Re: Mortgage - Important to go with a well-known bank?
« Reply #10 on: August 01, 2014, 08:01:23 AM »
Thanks everyone for the input. I am going to check out a place called Fortune Financial which has an office in Denver. I'm going to visit their office to see if they give off any shady vibes, but I am encouraged by the fact that 1) they have a local office and 2) they are BBB accredited. Their current advertised rate is 4.085%

We have plans to live in the home and it is a standard property, so hopefully things will go smoothly.

Cheers and THANKS to everyone for their input. I love this community.

davef

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Re: Mortgage - Important to go with a well-known bank?
« Reply #11 on: August 01, 2014, 09:01:28 AM »
I went with a company called loan depot and they advertise they will beat the rate on any GFE. They did it for me. You might want to take the lowest and call them and see what they can do for you. Discover was also good.

waltworks

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Re: Mortgage - Important to go with a well-known bank?
« Reply #12 on: August 01, 2014, 09:36:11 AM »
Be aware that the teaser rates on Zillow or elsewhere online are often not what you'll be offered on the GFE.

That said, definitely shop around. They are all going to sell the loan on anyway.

-W