How are online lenders like e-loan, LendingTreee, etc. - And how do I get the best rate on a loan?
Posted on Friday, July 13th, 2007 at 10:46 am.A client writes:
"Have you ever had a client work with Quicken Loans or E-loan? Do you have any thoughts on using an online lender?"
Our Answer: Yes we've had clients use all types of lenders. Online lenders tend to have a bad rap, but we've found a way to really have them benefit you. Here's our suggested "formula" to get you the absolute best rate:
1) Start by contacting as many lenders as you can. We'd suggest half a dozen or more. Have them all take an application from you. (This means they'll all pull your credit - see our related article on why this is OK). Within a few days of having made application with all these lenders, you will have a number of Good Faith Estimates (known in the industry as "GFE's"). Some will have better qualities than others; some will have a better interest rate, or not have a pre-payment penalty, or not have any (or as many "points"), etc. Make sure you do this before you put an offer on a house, because once the contract process gets underway, you won't have time to do all of this.
2) Now, here's the thing about local vs. online lenders: Online lenders can be fine, and they can all be terrible. It's a crapshoot. Think of it like buying a car you can't see. You might end up with a gem, and you might end up with a lemon. You could have a lender that won't answer his phone on the day of closing (yes this has happened to our clients). You could have a lender that's not familiar with the rules of the state in which you're buying (this has also happened), etc. So, you will definitely want to talk to at least one local lender. We also highly (highly highly) recommend that you use a local lender to get your approval letter (see our related post on the entire approval letter process) because the seller is going to feel much more comfortable looking at a contract from a lender they know vs. one that is not local. You do not have to use the same lender to buy your house as you have do your approval letter, so you can switch out later if you choose, as long as it doesn't affect the seller in a negative way.
3) Here's where the magic "DROdio Process" comes in: Now that you have several GFE's from local and online lenders, all you do have each lender try to beat the other lender's GFE. I promise you, they will trip over themselves trying to beat each other out. We see it all the time. The "when banks compete, you win" is VERY true; the difference is, we'd prefer you have them compete on yourterms, not an online servicing's terms, meaning you have local and online lenders competing together.
At the end of this process, by swapping GFE's back & forth until you feel guilty about it, you'll definitely end up with one or two clear winners. We would much prefer you chose a local lender (we can suggest a few lenders we trust) but you can choose an online lender as long as they communicate well with us. If you are leaning towards an online lender, we'd like to talk to them before you make your final decision.
Let's Meet for Coffee
Discuss your homebuying strategy with our owner
over coffee. Get more details here.
Common search terms are "HUD-1", "Easement", "Foreclosure", etc.
August 18th, 2007 at 12:15 pm
Many people are surprised to learn that mortgage interest rates can change on a daily and sometimes hourly basis. Interest rates fluctuate in response to changes in the financial markets. The bond market is generally the best indicator of the general trend for mortgage interest rates. What you need to understand is that the interest rates that are available on one day, may not be available the next, and so you should be prepared to lock when the time is right for you.
Richa Badami, CMPS Creating Wealth with Mortgage Planning.
Certified Mortgage Planner
The Badami Empower Mortgage Group
703-928-3030 Mobile
703-779-7042 Direct Office
866-409-3141 e-Fax
www.RichaBadami.com
August 18th, 2007 at 2:59 pm
RE: Should I make extra Mortgage Payments?
Owning a home outright can be a huge financial advantage, but there’s no rush. Once you have determined what payment schedule is right for you, in most cases you will come out ahead by sticking to it and investing your extra money in a market-matching index fund. A qualified financial planner will be able to make recommendations as to a fund that would make sense for you, and help you calculate how much you would save by paying off your loan early, as compared to your savings with how much your extra payments could earn if invested.
Richa Badami, CMPS Creating Wealth with Mortgage Planning.
Certified Mortgage Planner
The Badami Empower Mortgage Group
703-928-3030 Mobile
703-779-7042 Direct Office
866-409-3141 e-Fax
www.RichaBadami.com
October 24th, 2007 at 7:45 pm
Here’s an update to my post:
A client of ours decided to use an out of state lender. The process did not go smoothly. Here are some excerpts from his emails to me:
“[closing] was a mess. The seller disapproved the HUD-1 and started nitpicking which fees and pre-paids it was going to pay. Here’s a breakdown… $10300 total closing costs, $12000 credit from seller, but they were only agreeing to pay $7500 of it due to all these barriers and knucklehead logic they threw up about their being two HUDs and that some taxes are not “technically” closing costs. In the end, they gouged us so bad on paying the closing costs… All this was happening while I had the closing agent sitting in my dining room. Unbelievable! After all was said and done, I had to cough up $300 at closing out of the check returned to me.”