Online lenders vs local lenders for conventional loans

[Kyle P.]

Hey all,

I am looking to buy and move into a 2nd property (my first SFH will be turned into a rental). I am looking at some local brokers/banks and can get around 4% for a 30 yr conventional 5% downpayment. I am seeing online sites like Quicken or Box Loans advertising around 3.875% (the APR is lower than local rates too). Should I go with the online loans for the cheaper rate, or is there something I am missing? Any advice would be appreciated.

[Chris Mason]

Originally posted by @Kyle P.:

Hey all,

I am seeing online sites like Quicken or Box Loans advertising around 3.875% (the APR is lower than local rates too). Should I go with the online loans for the cheaper rate, or is there something I am missing?

You're missing the small print. Locals that aren't out to trick you (our reputation in the community actually matters) generally quote at somewhere between no points and one point. If someone is tight on cash to close, I might even quote at negative discount points (which is just what it sounds like).

Internet lenders, on the other hand, if you actually read the small print and the "Walk On Water" assumptions they make to arrive at that killer advertised/quoted interest rate....

(Link that'll give you that internet lender today)

You can ask your lender local to the Palm Bay area, or at least to Florida, to plug those "Walk on Water" assumptions in and see what their pricing engine spits out in terms of discount points for that advertised interest rate. It will generally be a lot better, because we live & lend in our communities so our employer doesn't need to spend a bazillion dollars on advertising. What we quote by default is YOUR scenario, not a "Walk on Water" scenario that's irrelevant to you, which is why the "quoted" interest rate by an internet lender will always appear better upfront -- are you putting 25% down, with a DTI below 30%, do you meet all those other bullet point assumptions, and (most importantly) wishing to pay more than two discount points?