Am I getting screwed by my mortgage broker?

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My wife and I are in the early stages of the home-buying process. We went to get pre-qualified, and the mortgage broker was really nice, which I expected since he was recommended by a family member. There were 2 things that concerned me, however. First, he said our credit was outstanding, both over 700, and that would qualify us for the best rate. Then he said our rate would be 6.5 if we signed today. He could tell we seemed a little surprised, so he explained that rates fluctuate hourly, like stock prices. I do not believe they change that much, and I think the best rate would have been closer to 6 percent. Does the interest rate vary much depending on how much money is put down on the loan? Is our rate higher since our downpayment was just under 10%? Second question, isn’t there a way to avoid paying PMI if your total liquid assets are over 20% of the loan, even if that much isn’t put down?

  1. Reply
    April 29, 2011 at 10:18 pm

    u have to bargin with them… tell the broker what u want if not tell them ur going to walk away.. they will work with u

  2. Reply
    April 29, 2011 at 11:10 pm

    I’ve been in the mortgage business for many years and themost Ive ever seen rates change in a day was twice and that was on an especially turbulent day and by .125%. Concentrate more on APR than the interest rate. You can often get quoted a low rate with high fees that drive the total cost or APR significantly higher. PMI is required on all conforming loans with less than a 10% downpayment. There are non-conforming or Alt-A loans that dont require PMI and often the rates are comperable.

    Best of luck with your transaction. Any time you feel you are being pressured into signing you probably are so go with your gut and take your time to research and shop around a little.

  3. Reply
    April 29, 2011 at 11:25 pm

    I’m a Mortgage Lending Consultant for Citibank. You’re better off dealing with a bank directly verses Brokers cause they charge you origination points at closing which is usually minimum 2% of your loan amount. By dealing with the bank directly you’re avoiding this fee which can mount up to thousands of dollars.
    The Broker was right with the change of interest rate. Rates can change everyday and even during the day. But keep in mind that it can increase by 0.125% or decrease by 0.125%, which is not a huge difference.
    Also, as you’re aware if you’re making less than 20% dowpayment you have to pay the PMI for minimum 2 years and providing your loan is below 80% of your property value. However, you can avoid paying by taking a “piggy-back” loan. The bank lends to the difference for the 20% downpayment in the form of a second mortgage. For example: You’re putting 5%down. You’ll have a first mortgage of 80% of the sales price and a second mortgage of 15% of the sales price. PMI is only calculate based on the first mortgage.
    The second mortgage is always beneficial to customers because the interest can entirely be tax deductible plus most banks waive all fees associated with it.
    Hope this helps and good luck with your home buying.

  4. Reply
    April 29, 2011 at 11:54 pm

    I’m a lender and I have to agree that going to a broker is not your best choice. All a broker does is find you a lender. With your credit scores being high you can find your own lender and save yourself money by not having to pay the middleman. Pay attention to your apr(annual percentage rate). It’s the rate after all the cost are added in. Brokers do have tricky ways of getting paid and it reflects on your apr. You won’t even see this amount on your good faith estimate. You will see it as a dollar amount at closing on your settlement statement disclosed as an “annual yield premium spread” ( doesn’t sound like commision does it). They also have junk fees that a lender/bank wouldn’t have. I’ve seen lender fees for $ 800 which is nuts! If you wanted to borrow more than 80% of the value as one loan yes you would have to pay pmi. You could also take out a loan for 80% and a second loan for the remaining amount but second loans are higher interest rates so you would generally be paying about the same. Laws have recently changed and pmi is tax deductible now. I don’t know why he would pressure you to sign for that interest rate if you are in the early stages of home buying. It sounds like he doesn’t know what he’s doing or shady. I wish you well. There is much more info I can share but don’t want to be typing all night so if you needed anymore help or had any questions I’de be happy to help you. I lend throughout the U.S. Don’t worry I won’t presure you into going through me for the loan or anything I just hate to see people get taken advantage of. If you email me I can give you my office line so we can talk more.

  5. Reply
    April 30, 2011 at 12:04 am

    For your first question: Rates fluxuate ALOT. The only way to lock in a low rate is to sign a paper when it is offered and close before it expires. Yes the down payment can have something to do with it, but probably not if you have good credit. You can pay “points” to lower you rate, which basically means that if you pay 1% of your total loan cost your rate is lowered by 1%. You have to pay PMI if the loan is for more than 80% of the total value. The only way to get out of this is to pay get the remainder of your loan as a home equity line of credit. Certain gov. loans also remove PMI.

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