The slogan is everywhere, but from an insider's point of view, is it true? Based on experience from the broker side, it doesn't always add up to a win for the consumer.
This blog is related the top internet lender who's slogan matches the headline. First, everyone should understand the costs associated and how it will impact not just program, but rate offered to the borrower. The main cost is not the initial lead cost, but a funding fee charged when the loan actually closes and funds. Keeping in mind that brokers do not pay these out of pocket, costs are worked into the loan rate or originations.
So, in short form, here's how the process rolls downhill and can create the rate/costs to increase at closing.
The borrower applies due to teaser rates and the option of speaking with up to 3-5 different lenders. All it takes is one of 5 lenders to low ball the quote or not disclose costs. Intergrity of the lender is not top priority for the borrower at this point, it's about the rate shopping. 4 other lenders shoot accurate rate and costs, but are leveraged out by the lowest quote. It's shocking when a borrower actually agrees the rate is too good to be true, but are drawn to the possiblity.
Borrower completes the process with the low man on totem, only to find the paperwork change at close. Question is why did it change. Typically it's due to the LO bidding to win, but not able to meet the program offered. Another cause is that the backend costs were not considered and the broker would have to either take a loss or barely gross any revenue. With a low revenue line and costs paid, the broker stands to actually lose money closing the loan.
Now the borrower sits in an uncomfortable seat. Close with a higher cost/rate or start the process again. Starting the process again can mean more expense and effort, which leads to the borrower signing the compromised program.
A competitive market is healthy and necessary for both the borrower and lender. The intent of this blog is to inform everyone to move cautiously when the program is better than market. The market sets the par price and almost every lender receives their funds from identical cookie jars. Also consider how the lender obtained the consumers information. This can be a short cut to identifying a over agressive, over promising lender who cannot deliver in the end.
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That's good advice, Dana. After all, you get what you pay for. My experience with banks is they're generally more expensive. If their rates are lower, it's usually due to them buying the rate down to be competitive. The Seattle Times did a study last year about bank interest rates and found their rates were typically higher and their fees (while not all disclosed) were generally lower. The bottom line is the customer needs to choose someone they trust to get their loan done in a timely and efficient manner. Have a great day!