Should I tell my banker I loan shopped to get a better rate? Is this other lender too risky?
I have owned a small business for the last 10 years so I went through my bank for a pre-approval on a mortgage. The banker seems to think it's a done deal with the sale and won't budge on the interest rate. He says FHA "is what it is, with no flexibility". We had also gotten pre-qualified (not pre-approved) with a lender who was referred to us. He says he is willing to cut into his pay to bring the rate down by almost a quarter of a point (with no points or fees). I haven't told my bank lender that I've loan shopped, but I told him I got an email this morning offering lower rates. He said it was just a hook in an ad, and again that "the rates are the rates". Should I tell him that I have a lender offering me a discount?
If I go with my bank the transaction may be more smooth since they carry my business. The other lender is asking for a lot more of our statements and things, and I'm a little concerned they will misunderstand my business structure and get hung up in red tape. But a quarter point in payment is huge. What should I do?
- DebdebLv 710 years agoBest answer
Since you were pre-qualified with this other lender, the lender hasn't pulled credit on you yet. When you get a blind quote like that, they tell you the best rate available, and you may or may not qualify for that. My impression is that the bank has pulled credit and has actually approved your income, assets and credit, since you used the term pre-approval. There is a difference between these things.
Have you locked your rate? If you did, then the bank is right. Your rate is locked. If not, you would get the rate in effect on the day you do lock. Being self-employed is another complication. You mention there could be an issue with your business structure, but the bank is already ok with it. I think you'd be risking not getting either mortgage is you dump the bank. FHA doesn't fix the rates, the individual lender does, but as a loan originator, I have very little leeway with rates. If the bank is telling you this is the rate, the person you're talking to probably doesn't have the authority to do anything else.
Right now you have the proverbial bird in the hand with your bank, and one in the bush with a lender you don't really know.
- loanmasteroneLv 710 years ago
You have to make a decision if you want to go with your bank who will not get off the rate they have quoted. If you so desire you may see if your banker will match or beat the mortgage broker's rate. This is done all the time in real estate transactions.
You also have a mortgage banker that can get you a mortgage loan for .25 difference.
This is such a minor difference that it really matters not which the rate is. You will be able to take the interest rate as a tax deductible item on your federal income taxes. So you will be getting that back.
Most interest rates are based on your credit score and that is proved by the minor difference in the rate between your banker and your mortgage banker.
If you have built trust with the bank and they have most of the documents you would need to close this real estate transaction as oppose to amassing the information your mortgage broker would want and need to properly close this transaction, you would have a decision to make which you feel more comfortable working with.
I hope this has been of some benefit to you, good luck.
- 10 years ago
If you have locked in a rate with the first bank you spoke to then their hands are tied and so are yours. That is why they are called lock in agreements. If you have not locked in then the FHA Rate you have been quoted should be flexible to the market conditions.
As for the other banker I can't say they are coming on to you with a "teaser" rate but it has happened before, just to steal business from someone else and to bump you in rate after you burnt the bridge with the other banker.
As for a quarter "point" it is actually a quarter percentage and it can't make that much difference. For example:
125K @ 5.00% for 30 years is $671.03 Principal and Interest
125K @ 5.25% for 30 years is $690.25 Principal and Interest
So $19.22 difference. (By the way I know FHA Rates are a little better than this, I am just using round numbers as an example)
"Points" are paid to reduce rates.
If I were you I would keep my business in house with the bank you do business with, they will be there to serve you personally and business wise while this second banker is just looking for a one time deal.
Good Luck in whatever you decide.Source(s): 25 years experience in Banking and Finance specializing in both Residential and Commercial Real Estate Finance.
- 3 years ago
Paladin - 1st congratulations for an exceptional job. 5 1/8 is great. As you already know by your homework, many people were lazy and didn't read their mortgage or did and gambled anyway and the dice went the other way, as did the irresponsible & greedy lenders. Neither should be bailed out. As for whether the proposed rate freeze extension actually helps or not remains to be seen. Any action that slows the foreclosure slide helps everyone. But the bigger problem is the doom & gloom media reporting. The REAL foreclosure numbers are about .16 %. That means 99.8 % of mortgages are fine & paying on time. This figure includes homes that don't even have mortgages! The percentage is even smaller if you restrict to homes that have mortgages. Also a large percentage of the foreclosures are get-rich-quick small investors who tried to ride the bubble to quick cash by buying up new development homes, then walked away when it burst. Should taxpayers bail them out too?
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- 10 years ago
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