San Diego - Agent and Lender relationship

[Andrea M.]

Hi, We are looking to buy a home in San Diego where we currently live.  It is a seller's market (like most parts of the country) and the agents we are vetting have all emphasized how important it is that the agent and lender have a good relationship. The agents have referred us to the lenders they use, however we are still rate shopping and want to minimize closing costs in addition to getting a great rate. These agent-referred lenders are not the least expensive, in fact some of their fees are the highest we've seen.  

Thoughts on lenders who are remote/out of state with better rates vs local brokers with higher fees, and how that may effect the buying process? 

Thanks

[Dan H.]

We use a higher cost mortgage broker who has provided good service.  I tried to use a lower cost option once and at the 11th hour (after having all documentation for weeks) indicated they could not get us the loan they quoted.

Beware of low cost options. 

Our higher cost mortgage broker was able to get us the loan, but rates had increased.  

He is now on our forever team because getting the loan is critical but also because of the extra service he has provided us.  

Here are service that our mortgage provide has provided or offered that is above expectations:

• He has always gotten us the loan.  This might not be above expectations, but I cannot emphasize the importance of this enough.  Especially after you get a late failure to secure the loan from another lender.
• He has provided us free comp service.  All we do is put in the address and we get an valuation, comps, etc.
• He has provided us free skip trace service.  
• He has offered to be escrow so we can go under contract on the weekend.
• He has provided provided contact to obtain free preliminary title checks on properties we were bidding on at auction.

I do not expect that he provides everyone these extra benefits.  We have financed somewhere around 20 loans with him, so he treats us well.

Sometimes you get what you pay for.  Sometimes it takes a while to fully realize the value that a good mortgage broker provides.

Good luck

[Rick Albert]

Here is my thought as an agent in the Los Angeles area.

The relationship is important in the sense that I know who is going to work fast and close.  The concern with some lenders is frankly the loan officer sucks and it takes more of my time to manage them than it does the transaction.

With that said, if the loan officer is popular in the real estate community, it can help.  Having that good relationship with a lot of agents means that people are going to know that they are going to close over others.  That's why whenever I write an offer, I CC my preferred loan officer and say that I have worked with him multiple times, including my own refinance.  

However, you are the client and you go with who you want.  It is the agent's job to work with what's given.  If you prefer to work with another loan officer/lender, as long as you have been fully pre-approved, I don't care and I'm not going to lose a closing because of it.

However, there is one lender where consistently I have had problems across multiple loan officers.  If I had two equal offers, I might consider going with another one.  It all comes down to reputation. 

[Thom MacFarlane]

Rates have increased steadily for the past two weeks thus any previous rate quotes are past history. Ideally you'd want to work with  a mortgage broker that can source numerous lenders for best pricing and service. Even then most my good quality loans I narrow it down to two leading national lenders for best pricing. 

The majority of your fees in a purchase are 3rd party fees not related to the lender. The base lender fees for credit report, tax service, processing and appraisal fee amount to about $1800+/- before paying points to discount the rate OR  accepting a higher rate to get a lender rebate to pay some/all or these costs. Not enough to make or break a deal.

Choose and commit to  a r/e agent and don't consider that agent/lender do not need to be a package deal as noted above posters.

[Andrea M.]

@Dan H. Thanks Dan, for sharing! It seems for an investor like you with a much more complex credit history and financials a highly responsive lender with deep knowledge and resources would be worth their price. Glad you were able to find such a great lender for your team! For a borrowers like my husband and I with a seemingly simpler situation (looking for primary home not an investment property, no debt except for our current mortgage, excellent credit and low DTI <10%), we were thinking we'd have more options to shop lenders/rates. We are starting to understand the value of competent and responsive lenders who earn their reputation and trust from agents though.

@Rick Albert Thanks for that insight.  We are still learning but are starting to realize the difference between agents who are willing to work with lender of our choosing but who also would let us know if there are concerns with lender, which we would appreciate.... Vs an agent who pushes a specific lender and does not seem to address our concerns or take the time to educate on the issues that you've brought up about the risks of a bad lender.  It just doesn't build trust.

@Thom MacFarlane Thanks, Thom.  I see your point about lender base fees, but does that include origination fees (percent of the loan), is that pretty typical?  I imagine a broker needs to get paid for their services somehow that adds to the cost.  On the other hand there is a large national bank that is out of state that has great rates, low fees but again, seems like it comes down to trust and reputation in the eyes of the agent who see the loan officer as risky to their transaction.  Although they don't come a packaged deal, some agents have made it seem that way, so thank you for your input!

[Brett Chandler]

@Andrea M.

Good Question! As a lender myself, there really is 'value' in having good relationships between the borrower, lender, and agent. That said, you shouldn't feel pressured into using your agent's preferred lender, especially if their fees are outrageous. I would spend the time to find a lender that was personal, knowledgeable, and reliable before I would pay higher fees or interest rates. 

I'm in the Portland area, but also licensed in CA. Happy to look over your scenario if you'd like.

[Thom MacFarlane]

@Andrea M.

It is a choice to pay origination fees. The more orignation fees (points)  you pay, the lower the interest rate. 

Mortgage brokers get compensated one of two ways:

Lender Paid- Mortgage Broker is paid by lender in a prearranged agreement. This is generally a fixed percentage of the loan.

Borrower Paid – Mortgage Broker and borrower negotiate the compensation that broker would receive. It can be a flat fee or percentage of the loan.

In most all loan scenarios neither of the above ways of compensating a mortgage broker would result paying greater in fees or in rate as compared to going to bank/lender directly.

National banks & lenders are buyers and aggregators of loans which they package for resell to secondary market for mortgage back securities. Banks like using mortgage brokers as one of their sources for originating loans. Why? It is cheaper for a bank to pay a broker for a loan than the bank to hire personnel, have brick & mortar, HR and myriad of other costs associated with a large scale included bad public relations when the layoffs come with the next recession.

The price you get directly from a bank is called “retail price” since a bank is like a retail store.

The price a broker gets from a bank is “wholesale pricing" since the broker is bringing lender and borrower together. The broker comp (lender ot borrower paid) is added on the “wholesale price.”  The pricing to the consumer (borrower) is still intended to be better than the bank "retail price" of the banks. 

Bottom line: Brokers are better since they get better pricing.

[Andrea M.]

@Brett Chandler - thanks for reaffirming what others have stated, good to know!

@Thom MacFarlane - appreciate the explanation regarding fees and how loans are sourced thank you!