Question
How do I find the lowest cost mortgage?
Answer
There are 3 methods of obtaining a mortgage today. You can go to a retail mortgage lender, a bank/credit union, or a mortgage broker. Each of these can provide you with a mortgage, but it is debatable which will provide you the "lowest cost" mortgage. Each party has its benefits and drawbacks to finding you the best mortgage.
A retail mortgage lender is a company like Countrywide that will be able to underwrite, fund, and service your loan. Retail lenders are becoming scarce as the mortgage crisis has caused many to shut their doors or significantly change their operations. If you are willing to do your own legwork and shop around the various direct lenders, you can save yourself the broker fees and find the best offer these lenders are willing to offer. Credit Karma updates a list of daily mortgage rates from hundreds of national retail mortgage lenders.
A bank or your credit union will usually have the lowest closing costs of the three options. Since you are dealing directly with the bank and assuming you are a current customer, it behooves the bank to keep this money in house which means better deals for you than you can find on the street by going to traditional mortgage companies. Closing costs and rates are typically low, which provides a good deal to the borrower.
The third option is a mortgage broker. The advantage of using a broker is that they have access to wholesale mortgage rates from lenders which are generally lower than the retail branches. They can also shop your mortgage around to several lenders to find the best deal for you. The flip side of this is that the broker is independent and must charge points or receive a yield spread in order to make the deal profitable for them. So while a broker may find you the lowest rate, the closing costs might be the highest. Using a broker is best when you have a financial situation that is outside the normal guidelines.
With all of that being said, each person’s situation is unique and there are benefits and drawbacks with each of these options. In order to cover all your bases, you should certainly consider all 3 of these options to see which will provide the right loan for you.
A retail mortgage lender is a company like Countrywide that will be able to underwrite, fund, and service your loan. Retail lenders are becoming scarce as the mortgage crisis has caused many to shut their doors or significantly change their operations. If you are willing to do your own legwork and shop around the various direct lenders, you can save yourself the broker fees and find the best offer these lenders are willing to offer. Credit Karma updates a list of daily mortgage rates from hundreds of national retail mortgage lenders.
A bank or your credit union will usually have the lowest closing costs of the three options. Since you are dealing directly with the bank and assuming you are a current customer, it behooves the bank to keep this money in house which means better deals for you than you can find on the street by going to traditional mortgage companies. Closing costs and rates are typically low, which provides a good deal to the borrower.
The third option is a mortgage broker. The advantage of using a broker is that they have access to wholesale mortgage rates from lenders which are generally lower than the retail branches. They can also shop your mortgage around to several lenders to find the best deal for you. The flip side of this is that the broker is independent and must charge points or receive a yield spread in order to make the deal profitable for them. So while a broker may find you the lowest rate, the closing costs might be the highest. Using a broker is best when you have a financial situation that is outside the normal guidelines.
With all of that being said, each person’s situation is unique and there are benefits and drawbacks with each of these options. In order to cover all your bases, you should certainly consider all 3 of these options to see which will provide the right loan for you.
Filed under: Mortgage
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