Who has the best rates and how to shop for them?

Question

My goal is to find competitive rates and fees. I've noticed that going to brokers usually leads to the same wholesalers so it's not as useful. The only other good lenders I've seen are credit unions and regional/local banks. However, they all require separate applications to even get an estimate. Is there a better way to shop around than this? What do you normally look for in choosing a lender?

Jason Wray · Answer

Waruna,

Best advice from a Banker is to build a relationship with an actual FDIC Banker that funds Nationwide and offers all programs.  The biggest detail is look for a nationwide bank that is full delegated with little to No overlays.  Reason why is because FDIC Bankers "Do Not" charge points on traditional programs like primary homes, standard investment purchase and refinance, Second home/vacation homes.

Lenders, Brokers all charge points to meet their Loan officer compensation plan (commission).  Not that that is a bad thing as some are on lower comp plans but they are at the mercy of all having "overlays" and have to sell their loans.  We all use private investors or NON/QM investors for DSCR but some again charge points and some do not because they UW the file (Mini-C).

Most Bankers typically offer rate closer to PAR or less margin built into the rate.  You can always do a rate buy down to get a lower rate but you will not have to pay "lender points".  If you build a relationship with a Banker you can call and have a detailed conversation about rates.  Most bankers can run live pricing to help you make a final decision without having to have your credit pulled several times or fill out a dozen applications and submit docs!

When you build a relationship and use a Banker time and time again they know your file, credit, and can determine what program would be best for the next step or cash out refinance.  We also run numbers to avoid lost money on blindly paying for an appraisal to find out its a dead deal or of no benefit.  Communication is key and transparency is something call centers do not offer.

If you ever have any questions or want to network feel free to reach out or send me an email.

Nick Velez · Answer

If you want the best rate, I would find the cheapest online lender you can find where you are number 37 out of 70 for the month. You may need to resubmit things several times, have a hard time getting ahold of them, and there is a very high chance they blow your deal up last minute, but at least you have the opportunity to get the best rate!

Real estate is a relationship game. Find a decently priced loan officer or two and stick with them. When I shop for new vendors, I pick who I like the most and has the best reputation, not who bids the cheapest. When I go to get more work done, I use the person that was fairly priced and met my expectations that first time, I do not shop around again for the lowest deal. When I need something done fast, I can count on them to squeeze me in.

Keep in mind that if you need the cheapest option for your deal to pencil, you probably should not be buying that deal.

Patrick Roberts · Answer

Rate is a function of price. If you want the "best" rate, be prepared to pay for it. That being said, there's more to the equation than just rate and fees. The competence and expertise of the lender absolutely matter, as do the terms of the product. Generally speaking, the best deal is rarely the "cheapest" deal.

Jacob Sherman · Answer

should shop for the best service

Erik Estrada · Answer

I think this can be easily solved by sticking to a few banks and building a relationship to get the better rate/fees. But more importantly ask for their rate sheet, if they can provide it, to understand, what the true interest rate is, the lenders spread, and the cost for that rate.

More than likely if a broker is using the same wholesaler, it is because collectively, that lender is offering the most competitive rate. Brokers are 100% commission only salespeople. Many of them will tell you what you want to hear, but if you are not saavy enough to do a bit of research, make sure they are reputable, and understand the importance of building a solid relationship, you will end up on the hunt, for lender, after lender after lender. Not very cost beneficial, when you can be worrying about getting more deals.

Jason Wray · Answer

Email is fine

Jeffrey Blackman · Answer

@Waruna Yapa you've gotten some good advice and some conflicting advice. Regardless of the type of lender you work with, building a trusting relationship is crucial. All lenders have strengths and weaknesses, staying close to them is the only way to learn what each of those are. I started my career as a commercial banker a long time ago, but have been an independent mortgage broker for nearly a decade. I feel this gives me the flexibility to find the right solution for my client and not just sell what my bank offers. I think @John Burke's comments speak to that. Although he is a banker, he thinks having the ability to operate as a broker and place loans with 30+ other lenders, in addition to his bank, is the "best setup."

I'll throw in my 2 cents on common differences I've seen in my career:

CDFIs - Because of their subsidized financing structure, they have the ability to be a low cost lender (and sometimes provide grants). However, you have to invest in specific communities where they are encouraging development. Often times, their approval processes are slow.

Credit Unions - Their member structure also subsidizes their financial structure so they can also be a source of low-cost financing. Many times they just do plain vanilla lending. Those willing to go beyond that could be good partners for real estate investors.

Traditional banks/Local Banks and non-bank lenders - If they are a portfolio lender, meaning they actually hold on to the loan and don't just collect your payment, then they have the ability to be flexible. Many banks securitize their loans (bundle them together) and sell the loans to Fannie Mae or Freddie Mac, while continuing to service the loans, that is collect your payment. This allows them to get more capital so they can make more loans without having to grow their asset base, while also maintaining their relationship with the customer through monthly payments. If a bank does this, they have no flexibility in their lending and must meet Fannie Mae's and Freddie Mac's requirements in each loan. In my experience, most have limited product offerings. Those that are portfolio lenders will often develop a niche, where they are really good. Your best bet would be to find a portfolio lender whose niche aligns with your investment strategy. I've seen banks be very competitive with blanket loans that cover multiple properties and/or multi-family properties, e.g. 5+ units.

Mortgage Brokers (obviously I'm biased) - Brokers have the ability to work with all of the above and can get you to the best lender for your scenario right away instead of having you waste your time with the wrong type of lender. I can quote from over 100 lenders instantly, but like John Burke, I usually only work with fewer than 30 in a given year. Contrary to what was stated in a previous response, brokers don't all charge points. Like any other wholesale market, I "buy" a loan from a lender at a discount and mark it up for my profit. I can do that through charging points, but since I'm getting it at a lower rate than you could as a consumer, I prefer to mark up the rate while still being lower than most others in the market. My markup is always lower than the original lender's because I don't spend money advertising during the Super Bowl, my president doesn't have a corporate jet, and we don't have layers of management we need to pay. So I'm always able to offer a lower rate and make a decent living without charging points.

My final thought, if you want to find the single lowest price in the market, I don't know how many companies you've spoken with, but 5,113 companies reported making residential mortgages in 2023. So, I hope you have a speed dialer and a large cup of coffee.

If you want low, competitive rates, fast closings and great service, work with a broker. I'm happy to share my experience as both a lender and investor. Just DM me.

Patrick Roberts · Answer

Exactly what it sounds like. Brokers, loan officers, and underwriters flat out get things wrong sometimes. Knowledge and skillset is a big part of this. Same goes for products and the terms that go with them. The same guidelines could have markedly different interpretations and implementations by different lenders.

Lender A tells you that your rate is X, Lender B tells you that your rate is a little higher because they see that the program/product that A is quoting wont work because of some minute detail. Lender A misses this or doesn't have this knowledge and then tells you a week before closing that your rate is changing because the program they quoted wont work once the issue is caught.

Lender A is $500 cheaper in lender fees because they dont pay for some program or staff who, among other things, doublechecks info inputs and documents for accuracy. The broker/LO misses something that gets caught late in the process and blows the loan up. Now, youre under the gun on a refi needed to finance another purchase and the loan you were counting on isnt - and never was - available to you because of an error that wasnt caught due to a lack on internal quality control. The list goes on.

For mission-critical items, you want quality, not cheap. There's an adage in several sports about critical things like protective gear: "a $10 helmet for a $10 head." The same goes here - you have an deal worth several hundred thousand dollars on the line. This isnt the place to nickel and dime at the expense of quality.

Waruna Yapa · Answer

can you clarify what you mean by expertise and competence?

Who has the best rates and how to shop for them?

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