Here are some important insider mortgage tips
BEFORE YOU DO ANYTHING, go to this website and OPT OUT (5 years or permanently is up to you). What this will do is (hopefully) cut down on the unsolicited sales calls you will get when the credit bureaus sell your information. I do my best to hide all non essential information when I run your credit, but the bureaus have so much info on you already, they sell it to other mortgage companies, insurance companies, home warranty companies, etc. It is ridiculously annoying. It takes a week to go through, so do it ASAP. Only takes a couple minutes.
https://www.optoutprescreen.com/
NEVER PAY MONEY UPFRONT to get pre-qualified or pre-approved. There is a big online lender that charges people $500 just to apply and then when the client either gets denied or decides to go somewhere else to get their home loan because they realize the rate they were quoted and the points they are being charged are ridiculous, that online lender KEEPS THE $500. Having a "rocket" doesn't mean anything except ripping people off. Banks also charge an upfront fee many times and then keep it if you don't qualify.
NO LENDER FEES - this is a trick used by other mortgage people to make it sound like you are getting a better deal than you really are. OF COURSE THERE ARE LENDER FEES, no one works for free. Those lender fees just get added to your rate, meaning you are getting a higher rate than you should and paying that over 30 years. Isn't it better to just pay the lender fees one time upfront? It's up to you and I can show you both ways and the rates associated with each way. Many times I am able to give you a lender credit to cover the underwriting fee, so it becomes a mute point.
ADVERTISING ON TV and spending over $1 BILLION a year on advertising and a "rocket ship", means you, the client, are paying for these ads.
DIRECT LENDERS and MORTGAGE BANKERS will have higher rates on conventional loans, FHA loans and VA loans. Especially FHA and VA loans as they are insured by the government. What do I mean? A typical mortgage broker makes between 2-2.5% on the loan amount. That equates to 200-250 BPS (basis points). A typical retail lender, direct lender or mortgage banker prices their rates around 5-7% commission on the loan amount (hey, they have A LOT of overhead and also a lot of people to pay... I really don't know what you do with so many "managers"). That equates to 500-700 BPS per loan. More than DOUBLE what a broker makes, that's why their rates are so much higher.
Mortgage brokers can close loans VERY fast, assuming the client gets all of their documents to that broker ASAP. We are averaging around 17 days from submission to clear to close, including weekends.
Most real estate agents have no idea how far apart pricing is between a broker and a direct lender. Once the client finds out, the client gets upset that their real estate agent referred them to someone whose rate is extremely high. So, ask your agent or the loan officer who you were referred to if they are a direct lender or a broker.
Mortgage brokers have to show you everything down to the penny. Banks and direct lenders do not. So, let's say there is $3,000 "behind the scenes" on your VA loan that you don't know about. That is your money and should go to you. However, banks and direct lenders will do something like this... they will say that you can give you back $1,000 towards your closing costs or pay your underwriting fee. And then you get excited because you weren't expecting that. But, little did you know that there was an extra $2,000 that they just kept for themselves that SHOULD have also gone back to you. As brokers, we are THE MOST regulated out of all mortgage originators and we HAVE TO Show you everything down to the penny. Anything that is left over after our legal commission (that typically the bank pays us to you your loan), AUTOMATICALLY goes back to you towards closing costs.
Mortgage Brokers have access to multiple banks and lenders (in our case, we have access to over 90 where as the average broker might have 5-7) and since not every bank or lender is good at every type of loan, we know which ones are good at what and we can use them for your loan. Who has the best 5% down conventional? 20% down conventional? FHA? VA? Under 620 credit score?, Bank statement program? High balance? Jumbo? All in one loan? 4 units? Investor 2 units? You get the idea...
My bank already has my information, so I will just go with them. This is a HUGE mistake for many reasons. First, the only information that they have of yours that you will need for your new home loan is copies of your last 2 bank statements, which you can just download online. They don't have ANYTHING else that you will have to provide. Next, they only offer their one rate and rate sheet. Thirdly, not every bank is good or even decent at every type of loan. Banks are not good at FHA or VA loans. Many time their conventional loans are slightly higher priced as well. They are good at jumbo loans, typically, as it is a loss leader for them. Fourth, banks are usually slower to get your approval and fund your loan. We average 24-48 hours for loan approval. Most banks are 2 weeks or so for approval. Fifth, banks typically have tighter guidelines (or overlays) than we do, so you might not qualify with your bank where you would qualify with us.
The larger the spread between the interest rate on a conventional loan, the more origination points or discount points you are being charged to get that low rate.
DOWN PAYMENT ASSISTANCE PROGRAMS - A couple of thoughts on these. First, the rates are always higher on these programs. Second, they are somewhat difficult to qualify for. Also, many times the down payment assistance 2nd loan screws you in the sense that you can't sell or refinance for a certain number of years or else you have to pay it all back. There are people right now that have rates in the 5's and 6's and can't refinance into the high 3's because of this 2nd loan they have. Realtors love to talk about these programs and hype them up on social media and when they talk to you because to them, you are another sale they can get and they truthfully don't really understand how they work and how they can end up screwing you. Also, FYI, if you do go this route, direct lenders have access to these programs as of now, brokers don't really have access to them (and we don't really want them).
Retail, direct lenders and mortgage bankers have MASSIVE overhead to pay for like offices, tons of employees, multiple managers who take a cut off of every loan closed, crazy expensive holiday parties, insanely expensive trips for "top producers" each year... you get the idea. Who pays for all of this? YOU DO in higher rates!
https://www.optoutprescreen.com/
NEVER PAY MONEY UPFRONT to get pre-qualified or pre-approved. There is a big online lender that charges people $500 just to apply and then when the client either gets denied or decides to go somewhere else to get their home loan because they realize the rate they were quoted and the points they are being charged are ridiculous, that online lender KEEPS THE $500. Having a "rocket" doesn't mean anything except ripping people off. Banks also charge an upfront fee many times and then keep it if you don't qualify.
NO LENDER FEES - this is a trick used by other mortgage people to make it sound like you are getting a better deal than you really are. OF COURSE THERE ARE LENDER FEES, no one works for free. Those lender fees just get added to your rate, meaning you are getting a higher rate than you should and paying that over 30 years. Isn't it better to just pay the lender fees one time upfront? It's up to you and I can show you both ways and the rates associated with each way. Many times I am able to give you a lender credit to cover the underwriting fee, so it becomes a mute point.
ADVERTISING ON TV and spending over $1 BILLION a year on advertising and a "rocket ship", means you, the client, are paying for these ads.
DIRECT LENDERS and MORTGAGE BANKERS will have higher rates on conventional loans, FHA loans and VA loans. Especially FHA and VA loans as they are insured by the government. What do I mean? A typical mortgage broker makes between 2-2.5% on the loan amount. That equates to 200-250 BPS (basis points). A typical retail lender, direct lender or mortgage banker prices their rates around 5-7% commission on the loan amount (hey, they have A LOT of overhead and also a lot of people to pay... I really don't know what you do with so many "managers"). That equates to 500-700 BPS per loan. More than DOUBLE what a broker makes, that's why their rates are so much higher.
Mortgage brokers can close loans VERY fast, assuming the client gets all of their documents to that broker ASAP. We are averaging around 17 days from submission to clear to close, including weekends.
Most real estate agents have no idea how far apart pricing is between a broker and a direct lender. Once the client finds out, the client gets upset that their real estate agent referred them to someone whose rate is extremely high. So, ask your agent or the loan officer who you were referred to if they are a direct lender or a broker.
Mortgage brokers have to show you everything down to the penny. Banks and direct lenders do not. So, let's say there is $3,000 "behind the scenes" on your VA loan that you don't know about. That is your money and should go to you. However, banks and direct lenders will do something like this... they will say that you can give you back $1,000 towards your closing costs or pay your underwriting fee. And then you get excited because you weren't expecting that. But, little did you know that there was an extra $2,000 that they just kept for themselves that SHOULD have also gone back to you. As brokers, we are THE MOST regulated out of all mortgage originators and we HAVE TO Show you everything down to the penny. Anything that is left over after our legal commission (that typically the bank pays us to you your loan), AUTOMATICALLY goes back to you towards closing costs.
Mortgage Brokers have access to multiple banks and lenders (in our case, we have access to over 90 where as the average broker might have 5-7) and since not every bank or lender is good at every type of loan, we know which ones are good at what and we can use them for your loan. Who has the best 5% down conventional? 20% down conventional? FHA? VA? Under 620 credit score?, Bank statement program? High balance? Jumbo? All in one loan? 4 units? Investor 2 units? You get the idea...
My bank already has my information, so I will just go with them. This is a HUGE mistake for many reasons. First, the only information that they have of yours that you will need for your new home loan is copies of your last 2 bank statements, which you can just download online. They don't have ANYTHING else that you will have to provide. Next, they only offer their one rate and rate sheet. Thirdly, not every bank is good or even decent at every type of loan. Banks are not good at FHA or VA loans. Many time their conventional loans are slightly higher priced as well. They are good at jumbo loans, typically, as it is a loss leader for them. Fourth, banks are usually slower to get your approval and fund your loan. We average 24-48 hours for loan approval. Most banks are 2 weeks or so for approval. Fifth, banks typically have tighter guidelines (or overlays) than we do, so you might not qualify with your bank where you would qualify with us.
The larger the spread between the interest rate on a conventional loan, the more origination points or discount points you are being charged to get that low rate.
DOWN PAYMENT ASSISTANCE PROGRAMS - A couple of thoughts on these. First, the rates are always higher on these programs. Second, they are somewhat difficult to qualify for. Also, many times the down payment assistance 2nd loan screws you in the sense that you can't sell or refinance for a certain number of years or else you have to pay it all back. There are people right now that have rates in the 5's and 6's and can't refinance into the high 3's because of this 2nd loan they have. Realtors love to talk about these programs and hype them up on social media and when they talk to you because to them, you are another sale they can get and they truthfully don't really understand how they work and how they can end up screwing you. Also, FYI, if you do go this route, direct lenders have access to these programs as of now, brokers don't really have access to them (and we don't really want them).
Retail, direct lenders and mortgage bankers have MASSIVE overhead to pay for like offices, tons of employees, multiple managers who take a cut off of every loan closed, crazy expensive holiday parties, insanely expensive trips for "top producers" each year... you get the idea. Who pays for all of this? YOU DO in higher rates!