The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: EatLessShitLess on January 08, 2015, 11:24:24 AM
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New to MMM. Always been frugal, but was starting to be swayed into the middle-class American lifestyle. So glad I found MMM to get me back on track.
We're purchasing a new house, and need some advice on shopping for a mortgage. We're putting 20% down and have credit scores 780+. I have no experience in this and am a bit overwhelmed. We've been working with a broker in our town over the last year while we were house shopping. He's very helpful and accommodating (as he should be, he stands to make some $$$). I've been told that he's very good at getting things done and making sure things run smoothly.
The seller doesn't want to close until April 1st. This makes it hard to compare mortgages because we're not going to lock in a rate yet. Because of this I tried to compare rates from a few lenders yesterday just to get a comparison.
Our credit union's posted rate yesterday for a 20 year fixed was 3.5%. I spoke with the broker and he thought he could get us 3.75%, maybe 3.625% but said it's hard to give a firm quote because so much can change. A .25% difference ends up being about $30 month or $7,000 in the life of the loan. Their closing fees were about the same. He didnt think he could beat the credit union's rate but its possible he'd end up matching it in the end. He was reasonable and seemingly honest. He said that people have a lot of problems with that credit union getting their mortgage to closing and we could end up with a lot of headaches (I've heard this rumor elsewhere too).
My feeling is that we have a good credit history, no debt, and plenty of cash on hand that we shouldnt have problems with the credit union. However, I havent done this before and I know what a colossal headache this can become. Is it worth the piece of mind to go with the broker and hope he can get us a comparable rate? Is that just the lazy way out?
Are there any questions I'm not asking that I should be?
Thanks in advance
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Do some due diligence to see if certainty of closing is a real concern with the credit union. If your closing is a straightforward, plain vanilla home purchase, I wouldn't be too concerned about it. Certainty of closing becomes an issue when there are added complications -- for example, cooperative apartments are a prevalent form of real estate in NYC but not elsewhere in the country so it is not uncommon for out-of-town lenders who don't have experience with that form of real estate ownership to have trouble getting to the finish line. Otherwise, I would comparison shop solely on the basis of price. Give your mortgage broker an opportunity to find you the best deal but if you find a better one on your own, go for it.
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I would recommend just shopping around on the web for the best rates. We refinanced a couple of years ago with Box Home Loans after getting a recommendation on here. They only work with those with higher credit scores and gave a very accurate rate and closing costs with a few answers on their web form. (I don't think they are available in all states, though).
For our first mortgage, we went the lazy route and just stuck with our bank; for the refinance we shopped around on the web and I much preferred the latter. I assume that the mortgage companies with the lowest closing costs have to spend as little time as possible on each transaction to still make a profit, so maybe that was why they were so much more efficient and easy!
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Go to bankrate.com or a similar site and compare the credit union rate with that of other lenders to see if it's a good deal or not. Make sure the geographic info and loan amounts, etc, are accurate when you ask for a quote.
I've had a couple of mortgages through credit unions. The level of service can be really hit or miss. Credit unions are non-profits and don't pay as well as banks and other mortgage lenders, so sometimes the level of competence you receive isn't as good. The problems getting to closing may not have anything to do with your individual situation as a borrower, but everything to do with the skill level of the person that is handling your loan. A broker will almost undoubtedly make the transaction smoother, but you'll have to decide if the rate they offer is competitive. Also, mortgage brokers are a dime a dozen so don't be afraid to call 2-3 other ones in your area and see what they have to offer. Look on Yelp for some highly rated ones. Tell them you are actively shopping rates/fees and make them fight for your business.
Disclosure: I've been in mortgage lending for over 10 years.
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Thanks so much for all of the help.
Brooklyn guy, how do I "do due diligence to see if certainty of closing is a real concern with the credit union"? I searched around the internet for reviews on the credit union, and they were mixed. One person did say this on :
Going through their mortgage dept for a 30-year fixed, no closing. The process for getting pre-approval was fantastic, no issues. Now, dealing with their mortage originator and processor has been a NIGHTMARE!! I've never thought I'd get treated with hostility when going through the mortgage process. I've getting yelled at for giving their bank hundreds of thousands of dollars. The rates don't justify the treatment.
not sure how much to rely internet reviews. Does this sound like a red flag?
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The mixed internet reviews could be a result of different loan officers, do they have several different people handling mortgages? Perhaps 1 is good and the other not good, do you know anyone personally who has used them?
I had this experience when I got a mortgage through Chase bank for my first home, the loan officer I had just did not have a clue what she was doing and I had a very complicated mortgage (though an affordable housing program).
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Yes, by conducting "due diligence" I meant doing things like looking up online reviews to find out other people's experience obtaining mortgage loans from that credit union. If your research indicates a trend of deals falling through because of problems with the credit union funding on schedule, that may be a reason for concern. If all you find are complaints (like the one you quoted) about discourteous loan processors, you just have to decide if service with a smile is worth paying extra for. Personally I would go with the cheapest loan I could find that seems reasonably certain to fund at the closing.
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I got a mortgage about a year ago. The 15 year rate was about 1% better than the 20 year rate. Went with 15.