mortgage broker or not?

i have found better rates myself than through a mortgage broker. i had great success with schwab

It depends on your financial condition and the property you're buying. I'm a real estate broker, but I've also bought a fair amount of property over the years, and have dealt with mortgage brokers and directly with banks. Back when loans were cheap and dirty, you could get a great deal from anyone, if you were smart about it. But it's different out there now.

I have a few genuinely decent and skillful mortgage brokers to whom I refer my current buyers. They are not skeevy the way a lot of mortgage brokers are, and they are great with first-time buyers. One thing we have been seeing is banks pre-qualifying buyers, then refusing to underwrite the loan after contracts are signed. A good mortgage broker has a back-up plan for that scenario, and relationships with a lot of lenders, including some you may not think to approach. One mortgage broker found my clients a loan (a jumbo, even) at a .5% discount from the one they were locked into, and got them out of the old mortgage and into the new one at no cost to them. I like having someone like that on my team, but I recognize that it's not for everyone.

If you do choose to go directly to banks, be sure to check out some of the smaller local banks, especially if your credit is brilliant. Apple Bank and Astoria are still underwriting loans at great rates. They never fell for the subprime scheme, and aren't hurting the way the big guys are.

Go direct to someone you trust will be there at closing. Here is an article on how the big banks are bypassing the mortgage brokers:

http://www.nytimes.com/2009/02/01/realestate/01mort.html?scp=1&sq=Chase%20mortgage%20brokers&st=cse

Read the chapter in Freakonomics to see how mortgage brokers raise the cost of lending for everyone. They have to get paid so they stick their fees in the loan somewhere.

Tina24hour: I just recently went into contract and I am relieved you weren't my broker. I had gone to a mortgage broker and they gave me a rate I thought was rather high. They said the same thing you are saying, "they have a lot of relationships with lenders". After learning about my situation, my broker told me not to go to mortgage brokers only. He told me to go directly to a bank and gave me a couple of his referrals to loan officers at some large banks.

Long story short, the banks were able to beat my mortgage broker's rate quote by almost 1/2% and had much lower fees. Turns out, most of the big lenders (Wells, Chase, Citi, HSBC, etc.) no longer offer their products through mortgage brokers.

Fififaye: ignore Tina's advice and go shop your loan directly with several banks. Times have changed and mortgage brokers seem to be things of the past.

Good work. A half a point is huge, especially when you figure it out over a 30 year period. Real estate brokers tend to work hand in glove with mortgage brokers, not always for the buyer's benefit, as you found out. It was nice to see that your real estate broker told you to go direct.

Hello1: If I was your broker, I might have recommended you go directly to a bank as well. I thought I was being clear when I said mortgage brokers are not for everyone. I'm glad you got a great rate - that's the whole idea, right?

I don't refer all my clients to mortgage brokers, but in many cases (lousy credit, parent guarantor, inexperienced buyer, iffy property) they can help buyers through the process and sometimes rescue a deal. I happen to work with a lot of buyers, especially here in Brooklyn, who aren't perfect in the eyes of most banks. That said, one of the people on my regular referral list is a direct loan officer at Wells. As always in real estate, every situation is unique.

One thing we could do here is discuss what types of loans you should be looking for, regardless of the source. In an ideal mortgage, you will pay no points for the lowest possible rate, you will pay no "origination fee", and you have no prepayment penalty should you sell in the near term. If you a first time buyer with a low down payment, make sure your broker or banker is in a position to originate FHA mortgages. There are often tradeoffs - you pay a point at origination to save a .75% on the APR. If you absolutely can't avoid these compromises, try to look at what your choices will mean over the course of the loan. If you plan on being in the property for only a couple of years, a higher APR might be manageable. (But then, if you're planning on being in the property for only a couple of years, you probably shouldn't be buying right now!) And be sure to review the terms of the loan before signing anything. Sometimes unpleasant terms have a way of sneaking into a loan commitment.

fififaye: Can you share with us some details of your purchase? Jumbo or conforming? Credit scores? % down payment?

hello1, what were some of the banks that you went to and which had the best rates?

As a mortgage broker I provide a genuine service to many individuals who do not have the luxury of going to different banks and trying to squeeze a 1/8th or .25 here and there. Time is money in this city and if my clients were to waste their time shopping for a mortgage it would surely cost them much more in the long run than paying my origination fee.

If you have plain vanilla conforming loan it probably makes sense to go directly to the banks. Fortunately for me there are still many complicated transactions out there that require my experience and expertise. Furthermore, the banks that are still lending are extremely busy, try closing a refinance with Wells Fargo within 45 days, its not possible. I have relationships where I can expedite files and save my clients money by getting them closed faster.

Tina24hour: Glad you clarified. Giving a buyer a couple of good direct lenders is very helpful. Wells though was not a good choice for me because I was purchasing a coop. The Wells loan officer told me that Wells is not particularly strong with coops because they are not a New York City based lender. Plus, their rates were higher than all the other lenders I called.

Special_K: It depends on what you are looking for. For me, Chase offered the lowest rate. I am a Chase customer too so they reduced my rate by .25% because of it. Call around all the major lenders and give them your situation. But I would try to get a referral from a real estate broker to a specific loan officer at different banks. The referrals my broker gave me at Chase and Citi were very knowledgeable and professional. But when I just walked into a branch at the other lenders, the loan officers there were not as good. Many were very "green" and had poor business skills. The difference was striking. I think this is where a real estate broker's experience and knowledge can help. They can point you to good loan officers at those banks. (The 2 loan officers the broker gave me didn't work at a branch and worked solely off of referrals, so I would have never found them on my own.) Good luck!

407Pas: Yes, I was very lucky to have a broker refer me to 2 direct lenders. The broker knew I was going to purchase the apt even with the higher rate. Therefore, he saved me a lot of money. Thanks for the NYT article too, very interesting.

Good luck getting a good rate from Chase, Citi and Wells on a jumbo loan. Good luck being self employed and writing off your income. Those banks will have security remove you from the lobby.

Mortgage brokers might not be for everyone but many of my clients would argue with the notion that they should not exist. I have saved clients from losing a $400,000 deposit on a property because I was the only one who could get the loan done. At the end of the day there are a lot more banks available then the average consumer knows about. I have yet to lose a loan to interest rate or ltv to any of the large institutions on Jumbo loans.

The truth is that many people buy into the media hype about mtg brokers becuase in the majority of markets, conforming loans are the norm. Manhattan is not a normal market. Which is exactly why this blog/site exists.

Disclaimer: I am a mortgage broker and completely bias