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Is it better to go through a loan officer or directly to the bank?

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[ the following posts are from a email, they are not necessarily my views or opinions, I cannot attest to the accuracy of any claims made by author, I am not affiliated with original author of information]

Terms to know in the mortgage game

Adjustable Rate Mortgage Loan (ARM) These are mortgages where the interest rate changes based on market conditions. The interest rate will be tied to some index such as the prime rate for example, and the lender will charge a premium on top of that index. These loans typically have an introductory period where the interest rate will be fixed at a lower rate; however, at the end of the introductory period the interest rate will go up to a much higher rate. When the interest rates change the amount of your monthly payments will change with it.

Annual Percentage Rate (APR) This is the interest rate that includes all finance expenses for the loan. The Annual Percentage rate factors in origination fees, points, and any other fees that come with the loan, including the interest paid on a yearly basis This APR is higher than the advertised interest rate and will let you compare mortgages from different lenders and the fees associated with each.

Interest Rate and Payment Caps Caps on the amount interes rates can go up at any one time or over the life of the loan serve to protect the homeowner from rate hikes. Payment caps also protect the homeowner by limiting the amount the monthly payment can go up.

Closing Costs This is the sum of all fees and expenses you mus pay when taking ownership of a property. These fees must be disclosed prior to closing and include any fees, insurances costs and taxes

Debt to Income Ratio This is the ratio a lender will use by taking the sum of your debt versus the amount of income your receive This is used by the mortgage lender along with your payment history to determine your credit worthiness.

Down Payment The initial payment you make when purchasing your home. It is typically 20% of the property value and is the difference between that value and the amount of your mortgage loan

Equity is the portion of the home owned by the homeowner; the mortgage is the portion of the home owned by the lender. Put another way Equity is the difference between the appraised value and the outstanding balance of the mortgage

Escrow Account This is an account set up by the mortgage lender that is used to pay the homeowners insurance and property taxes for the home. Escrow accounts protect the lender’s interest in the property by ensuring taxes and insurance are paid.

Mortgage Underwriting is the process your lender goes through in preparing your mortgage. They will evaluate your credit, your income, and the appraisal of your property before approving you for the loan.

Title Underwriter is an insurance company providing title insurance for the property. Title insurance protects the interes parties from problems with the property title. These problems are referred to as “Title Defects.” Defects could include any lean placed on the property that was not found in a title search. The insurance pays any legal expenses resulting from title problems.

Interest Rates When your mortgage lender gives you a loan for your home they are trying to make a profit by charging you for use of their money This is the interest you pay and mortgage loans are front loaded with interest. Front loaded means in the early part of your mortgage most of your payments will be applied to interest on the loan. If you are in the process of shopping for a mortgage pay close attention to the lock period your lender offers you. The lock period is the amount of time you have to close on the mortgage where the lender guarantees the interest rate you have selected. If f you run into problems closing and go over the timeframe for the lock period you could lose that interest rate. Make sure your lender gives you enough time to close, including any unforeseen problems.

Points Points are basically pre-paid interest on your loan. Like a down payment, you are pre-paying this interest to receive a lower interest rate for your loan. Points are 1 percent of the loan amount. For example on a $200,000 mortgage loan pre-paying 1 point at closing would cost your $2,000. If you can afford to pay at least 3 points at closing time you could significantly lower your interest rate. This is a small price to pay for the amount of interest you will save over the course of your mortgage.

Closing Costs Closing costs are the out-of-pocket expenses you will have when closing on your mortgage. The costs you will pay at the title company’s closing will depend on the lender and the loan you have selected. Your mortgage lender is required by law to disclose all fees required prior to closing. You should receive a good faith estimate of these expenses from every lender as part of your comparison shopping before choosing a mortgage.

MUST GET GOOD FAITH ESTIMATE OF ALL OUT OF POCKET EXPENSES FROM EVERY LENDER BEFORE CHOOSING MORTGAGE.

RESPA is an acronym for Real Estate Settlement Procedure Act This is a Federal law established to protect consumers and requires lenders to disclose key information about their loans Lenders are not required to disclose this information until the application is received. The Truth in Lending form must be signed by the homeowner prior to closing

NO DOWN PAYMENT OR 100% LOANS

100% Mortgage Loan Basics Despite the recent credit crisis, 100% mortgage financing is still possible for the average homebuyer. There are two basic options available to the average homeowner for 100% financing

PMI Loans: Many lenders require Private Mortgage Insurance(PMI) for any homeowner with less than a 20% down payment Private Mortgage Insurance can be expensive and could add hundreds of dollars to your monthly mortgage payment.

If you’re not familiar with Private Mortgage Insurance this insurance protects the lender from losses if you default on your loan. In the event of foreclosure the insurance pays the lenders expenses; this insurance does nothing to protect you as a homeowner. If you have poor credit there is little you can do to avoid paying PMI. If you have good credit the second option could save you money.

80/20 Mortgage Loans: 80/20 loans are also called “piggyback loans.” Taking out an 80/20 loan allows you to avoid the expense of Private Mortgage Insurance because your primary lender is only financing 80% of your home. You will have a second“piggyback” loan for the remaining 20%. This second loan is typically with a different lender and will carry a higher mortgage rate because this lender is assuming greater risk than the primary lender. The downside of an 80/20 loan is that you will have two mortgage payments to make each month. Fall behind on either mortgage and you could lose your home to foreclosure.

100% Mortgage Loan Risks There are financial risks involved with 100% mortgage loans Primarily, because you are financing the total value of your home you will have next to no equity in the property. If home values in your area decline you could find yourself owning more than your home is worth.

Edited by ditaloca
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Lots of good info here. Let's just keep in mind that what really matters are the terms of the deal. If a broker gets it done, great. If a banker gives you what you are looking for, then that's fine too. And banks are perfectly acceptable. In my quest for a mortgage for the past month, the "straight to the bank" option won out. The bank beat the mortgage banker by 0.375% and $500 in upfront fees. It all depends on the situation. Here is why:

Bankers, brokers, and most larger banks package loans and sell into the secondary stream of packaged loans that become bonds. Since these loans are commoditized, sorted, and packaged, the borrower must fit into a particular cubbyhole. Depending on what cubby hole you are in = the penalty rate you are in because investors will want more yield on bonds containing loans with borrowers that are less than perfecto. See the tables posted at efanniemae on the LLPA matrix here: https://www.efanniemae.com/sf/refmaterials/llpa/

Some banks hold their loans and set their own rules and regs as to what borrower gets what rate. They do not have to assess "penalty rates".

A simple example of this is what I just went through. I have a 717 FICO and my wife has a 809 FICO. We are putting down 20%. Mortgage banker had a long list of investors ready to pick up the note at 5.25% as of yesterday. This was because fannie mae assesses a 0.75% PENALTY rate because I have less than a 720 (see LLPA matrix above). Fed up with his inability to move the rate, I applied to a small bank yesterday afternoon who does not sell their loans. They locked us at 4.875% (4.883 apr). The only fee is a $350 application fee (compare to $900 for mortgage banker).

You have to shop, shop, shop. And don't be afraid to say f you when you don't get what you want. It is just business.

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I'm looking to obtain a mortgage loan. I am wondering would I save more money if I go directly to the bank for the loan? Or would it be better to go through a broker? I have excellent credit by the way.

If you look for mortgage financing then you can walk into a local bank. If your bank does not have any good loan program that is suitable for your needs. It does not mean that another bank cannot help you. If you take help of mortgage broker/banker rather than directly go to the bank, then I think it is a good deal.

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It would be better if you approach a mortgage broker first before going through in a bank . Mortgage broker can lay you down possible information that you can use in your mortgage.

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With excellent credit you have access to the best rates available to both the loan officer and the banks... Try calling up both and see what the lowest rate you can get from each would be... I'm probably going to do ours with a loan officer... One who understands our situation our credit and most importantly our lives better than a huge bank would.

Definitely agree. They should both be able to help you out.

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