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Negotiating the best mortgage


rayfinkle
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Hey everyone-

 

I'm in the process of putting banks in competition for a mortgage. Wondering if anyone has a line on banks that are particularly flexible, good rates, good structure, etc.

 

Buying well below my means, but also very interested in squeezing every last penny of financing value there is to be had.

 

I'm trying to optimize around:

-Rate--both lowest & locked

-Payment--exploring IO structures

-Flexibility--structured finance background means I'm pretty comfortable with "out of the fairway" stuff if there's value there

 

At this point my lead horse has a 20% down 7 year fixed IO at 2.75-3%.

 

Home is in California. Also would love any ideas on how to hunt for value elsewhere in the home purchase process! Done a bunch of corp. M&A but haven't bought a house before!

 

 

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At this point my lead horse has a 20% down 7 year fixed IO at 2.75-3%.

 

 

IO ?

 

A few days ago I checked if Brexit had cause rates to drop enough for me to refinance. Costco Mortgage Services showed me 3.375 for a 30 year fixed.

 

Wells Fargo shows 3.375 for 30 year Jumbo which is lower than the rate for conforming.

https://www.wellsfargo.com/mortgage/rates/

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At this point my lead horse has a 20% down 7 year fixed IO at 2.75-3%.

 

Home is in California. Also would love any ideas on how to hunt for value elsewhere in the home purchase process! Done a bunch of corp. M&A but haven't bought a house before!

 

Are there companies in the USA that offer to search for a loan with the cheapest coupon?

 

I am asking because in my experience, even getting a first indication for the interest rate of a loan involves some hours of work, when talking directly to individual banks. There are some loan brokers here in Germany, and imho they offer great value. We received an offer via such a loan broker that was 30bp lower than the best offer by the 5 banks that we asked. We applied for the loan in the last week and are still waiting for acceptance and confirmation of the interest rate. The loan is in EUR, hence the interest rates are considerably lower than in the USA, nonetheless I am giving the figures so that you can get an idea of how valuable the service of a loan broker is: The current indication for annual interest is 1,27%, fixed for 10 years, for a 10 year annuity with a total coupon of 5% (i.e. redemption of 3,73% in the first year), with a 20% down payment and additional 5% prepayment rights per year at no additional cost. Charges and fees of the loan broker are included in the interest rate. The best offer by a bank was 1,6%. Before the Brexit, the interest indications that we received were around 30bp to 40bp higher than today, for the same loan.

 

Maybe it would be worthwhile to search for such loan brokers - or if you don't find any, to think about starting such a business - in Germany these businesses are very successful, just look at the stock chart of Hypoport AG which offer this kind of service. I think that it's a good business model, with a network effect and thus a business moat once you've managed to start, because the more customers the brokers serve, the better their market insight.

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I'd want to know the reputation of my lender as well.

 

https://newrepublic.com/article/134722/foreclosure-sleuth

 

You have little control of who your lender ultimately is. Your mortgage can be sold at any moment to anyone. Sure, some lenders are more likely to retain mortgage, but overall there's no guarantee. My mortgage got transferred (sold?) two or three times in the last five years.

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I'd want to know the reputation of my lender as well.

 

https://newrepublic.com/article/134722/foreclosure-sleuth

 

You have little control of who your lender ultimately is. Your mortgage can be sold at any moment to anyone. Sure, some lenders are more likely to retain mortgage, but overall there's no guarantee. My mortgage got transferred (sold?) two or three times in the last five years.

 

I've initiated several mortgages over the last 30 years from many different financial institutions including banks and credit unions. They were all sold, some multiple times.

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Ray,

 

Can you share your process for searching for the best mortgage deal?  I'm in the market for similar services/products at this moment and I'd like to get a sense for price discovery.  From my perspective, I would prefer higher LTV for a cash out refi with 30 year fixed rate. 

 

How do you keep the fees, appraisal, loan origination etc to a minimum if you're applying for loans with 5-10 lenders?  I think each application cost a few hundred dollars. 

 

Thank and happy to talk privately if you want.

 

BG2008

 

Hey everyone-

 

I'm in the process of putting banks in competition for a mortgage. Wondering if anyone has a line on banks that are particularly flexible, good rates, good structure, etc.

 

Buying well below my means, but also very interested in squeezing every last penny of financing value there is to be had.

 

I'm trying to optimize around:

-Rate--both lowest & locked

-Payment--exploring IO structures

-Flexibility--structured finance background means I'm pretty comfortable with "out of the fairway" stuff if there's value there

 

At this point my lead horse has a 20% down 7 year fixed IO at 2.75-3%.

 

Home is in California. Also would love any ideas on how to hunt for value elsewhere in the home purchase process! Done a bunch of corp. M&A but haven't bought a house before!

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What I found doing this last year was you might be quoted a rate, but until underwriting is done there is no guarantee that you can actually get that rate.

 

In terms of fees just prepare for them to be all over the place. You are either paying explicitly for the paperwork, or it's in the rate.

 

Some banks can do this very cheaply.  I know one that $250 flat for a refi.  You need to shop, but there is an issue with that.  If you shop too much you'll have too many credit report pulls and end up with a higher rate.  It's a balancing act, getting enough info to get a good rate, but not too many hits that your rate tanks by trying to find a good one.

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What I found doing this last year was you might be quoted a rate, but until underwriting is done there is no guarantee that you can actually get that rate.

 

In terms of fees just prepare for them to be all over the place. You are either paying explicitly for the paperwork, or it's in the rate.

 

Some banks can do this very cheaply.  I know one that $250 flat for a refi.  You need to shop, but there is an issue with that.  If you shop too much you'll have too many credit report pulls and end up with a higher rate.  It's a balancing act, getting enough info to get a good rate, but not too many hits that your rate tanks by trying to find a good one.

 

What your rate goes up because of asking too many credit reports? That's ridiculous. A clear sign of government intervention :(

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Guest cherzeca

We have loan brokers in the USA too. He/she can be very helpful if you can find a good one in your area. Get some referrals from nearby friends and families.

 

i have found loan brokers to be very helpful.  going to banks directly or using lendingtree.com and other search tools were not as helpful

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I got my last N mortgages through a single mortgage broker guy. I pretty much always took 30y no points no fees, which gives a bit higher rate, but then you refi again at no points no fees when rate drops .5 or more. So ended up at 3.5% and sitting there. Not sure if rates ever got to 3.0% 30y no points no fees. Perhaps I should ping the guy to check. ;)

 

Edit: I don't see rates at 3.0% right now. Should keep it in mind - maybe we'll drop there.

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What I found doing this last year was you might be quoted a rate, but until underwriting is done there is no guarantee that you can actually get that rate.

 

In terms of fees just prepare for them to be all over the place. You are either paying explicitly for the paperwork, or it's in the rate.

 

Some banks can do this very cheaply.  I know one that $250 flat for a refi.  You need to shop, but there is an issue with that.  If you shop too much you'll have too many credit report pulls and end up with a higher rate.  It's a balancing act, getting enough info to get a good rate, but not too many hits that your rate tanks by trying to find a good one.

 

What your rate goes up because of asking too many credit reports? That's ridiculous. A clear sign of government intervention :(

 

Yes, your credit score could be negatively impacted by too many credit pull requests in a period of time.  This is why a broker can be good.  They do one pull and then shop for rates for you.

 

I've never had good luck going directly to banks.  The rates were always higher and the people weren't as good to work with.

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At this point my lead horse has a 20% down 7 year fixed IO at 2.75-3%.

 

 

IO ?

 

A few days ago I checked if Brexit had cause rates to drop enough for me to refinance. Costco Mortgage Services showed me 3.375 for a 30 year fixed.

 

Wells Fargo shows 3.375 for 30 year Jumbo which is lower than the rate for conforming.

https://www.wellsfargo.com/mortgage/rates/

 

I'm currently working with Citi in Illinois.  They will give 30 year fixed on Jumbos up to $1mm loan with 15% down at as low as 3.25% if you move $250k of money to their bank/brokerage, no PMI.  The rate is 3.5% for 15% down with no $ moved to their brokerage.  The same loan with 20% down drops the rate by 12.5bps.

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Yes, your credit score could be negatively impacted by too many credit pull requests in a period of time.

 

that's not quite accurate.  multiple pulls for mortgage applications within some short time frame (1 month?  something like that) are consolidated and treated as a single pull.  unless you are searching over a very long time period, your score will not be significantly impacted.

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I got my last N mortgages through a single mortgage broker guy. I pretty much always took 30y no points no fees, which gives a bit higher rate, but then you refi again at no points no fees when rate drops .5 or more. So ended up at 3.5% and sitting there. Not sure if rates ever got to 3.0% 30y no points no fees. Perhaps I should ping the guy to check. ;)

 

Edit: I don't see rates at 3.0% right now. Should keep it in mind - maybe we'll drop there.

 

Jurgis - how were you able to get a mortgage with no fees?  Appraisal, underwriting, title insurance, legal fees - all mandatory as far as I know.  Would love to know your secret.

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I got my last N mortgages through a single mortgage broker guy. I pretty much always took 30y no points no fees, which gives a bit higher rate, but then you refi again at no points no fees when rate drops .5 or more. So ended up at 3.5% and sitting there. Not sure if rates ever got to 3.0% 30y no points no fees. Perhaps I should ping the guy to check. ;)

 

Edit: I don't see rates at 3.0% right now. Should keep it in mind - maybe we'll drop there.

 

Jurgis - how were you able to get a mortgage with no fees?  Appraisal, underwriting, title insurance, legal fees - all mandatory as far as I know.  Would love to know your secret.

 

In reality they eat the fees so it’s effectively lowering the interest rate slightly.

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I got my last N mortgages through a single mortgage broker guy. I pretty much always took 30y no points no fees, which gives a bit higher rate, but then you refi again at no points no fees when rate drops .5 or more. So ended up at 3.5% and sitting there. Not sure if rates ever got to 3.0% 30y no points no fees. Perhaps I should ping the guy to check. ;)

 

Edit: I don't see rates at 3.0% right now. Should keep it in mind - maybe we'll drop there.

 

Jurgis - how were you able to get a mortgage with no fees?  Appraisal, underwriting, title insurance, legal fees - all mandatory as far as I know.  Would love to know your secret.

 

In reality they eat the fees so it’s effectively lowering the interest rate slightly.

 

Exactly. Mortgage guy just pays these fees from his pocket. Which means that he likely gave me a bit higher rate which made his commission higher and then he paid fees from his commission.

 

If you don't plan to refi and plan to hold mortgage very long, you are likely better with fees (and maybe with points too) to get a lower rate now.

If you expect to refi, you are better off with no fees/no points, since the fees you paid are pure loss and the bit higher rate you get now will be refi'd anyway.

In the past 10 years or so it was better to go no-fees/no-points since you refi'd frequently. Now it's harder to say - we might be at the bottom - or not. ;)

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I've used aimloan before (https://www.aimloan.com/)

 

They gave me better rates than the broker I was working with could give me so I went with them.  Maybe because they are a direct lender and the broker needs to make a commision?  I don't know.  They also give you a rate quote on their website without you providing personal or contact info, this alone made me want to do business with them.  Everyone else wants you to apply for the loan before they will tell you anything.

 

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I got my last N mortgages through a single mortgage broker guy. I pretty much always took 30y no points no fees, which gives a bit higher rate, but then you refi again at no points no fees when rate drops .5 or more. So ended up at 3.5% and sitting there. Not sure if rates ever got to 3.0% 30y no points no fees. Perhaps I should ping the guy to check. ;)

 

Edit: I don't see rates at 3.0% right now. Should keep it in mind - maybe we'll drop there.

 

I see - thanks.

 

I'm looking at a refi right now, but I honestly can't imagine refinancing again after this. How much lower can mortgage rates go?  By my math, my fees will be repaid by monthly savings within 15 months of refinancing. I'm about to pull the trigger on it.

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I got my last N mortgages through a single mortgage broker guy. I pretty much always took 30y no points no fees, which gives a bit higher rate, but then you refi again at no points no fees when rate drops .5 or more. So ended up at 3.5% and sitting there. Not sure if rates ever got to 3.0% 30y no points no fees. Perhaps I should ping the guy to check. ;)

 

Edit: I don't see rates at 3.0% right now. Should keep it in mind - maybe we'll drop there.

 

I see - thanks.

 

I'm looking at a refi right now, but I honestly can't imagine refinancing again after this. How much lower can mortgage rates go?  By my math, my fees will be repaid by monthly savings within 15 months of refinancing. I'm about to pull the trigger on it.

 

If we get a recession, the 30 year mortgage will get below 3% for sure. I personally like a payback in less than 12 month before refinancing. NY has a tax on mortgage, which creates a hurdle on refinancing with a different lender unfortunately. When I was in CA, I was a serial refinancer with low/no fee refinances. My 30 year mortgage sits at 3.625% and I will start looking if we hit the 3.0%. I give this about a 50% chance.

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  • 1 month later...

Thanks everyone! Sorry for the delay, been a busy month. Here's where I landed, happy to provide more thoughts either here or in PM:

 

-90% LTV, simple weighted interest rate of 3.1% fixed for y years

-Interest only for 10 years

-$1,000 ish in total fees

-Executed via 75% LTV I/O 7/1 ARM + 15% LTV HELOC

 

Location = Norcal

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