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Would it ever be better to use a lender with an identical loan but more closing costs?

I have worked over the phone with a local mortgage broker and have gotten online quotes from various search engines.  One of the quotes I got from Zillow gave me an identical quote in terms of rates but was $800 less in closing costs.  The loan type is the same and interest rates are identical.  I know I've talked and e-mailed with the one person, but it seems I should go with the lower price.  What would be reasons for and against doing this?
  • July 12 2009 - Wilsonville
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Answers (11)

There are few guarantees in life.  You CAN pay to much and not get a value or what you think you paid for.  If you pay to little however I guarantee you get what you pay for. 

$800 less in fees is off far enough to cause me a red flag and could just be a very competetive quote.  Be very wary of the same rate with no fees or thousands less.  We all have the same Wall Street to deal with and no lender has a conforming product that is so good and different that no one else has. 

If all things are equal and you have real disclosures (not quotes) in hand, go with the lower :-)
  • September 19 2009
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I never want cheap...I want inexpensive.....When you go with cheap.... you get what you pay for!
  • July 16 2009
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Service, expertise, knowledge.  So many things come into play when dealing with a loan officer.  This will be one of the biggest transactions of your life, you'll want to feel confident you're in good hands. 

If you feel the person who's charging $800 will get the job done, then it's not a big deal choosing that loan officer. If you feel the person with the lessor fees will get the job done, then choose that loan officer.

The last thing you want to do is choose someone based on fees alone.  It's not a good deal if they never close your mortgage right?
  • July 16 2009
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I would get a good faith estimate from each and see where the difference lies. It could be that one is charging you a broker or loan origination fee. If you ask me, I would go with the lender with the lower fees.
  • July 16 2009
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Profile picture for NorthpointeBank
Depending on who the two options are from you may also want to consider asking who the servicer of the loan will be. Some servicers have great rputations some don't if you escrow taxes and insurance you will want to be in the hands of a decent servicer. If you you aren't including escrows and you can't differentiatebetween who is a more trustwothy source then go with the lower price.
  • July 16 2009
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Michael you had me right up until the Upfront Mortgage Broker....A designation you pay to obtain....
  • July 16 2009
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1) All lenders are not the same.  They vary greatly based off of education, experience, determination and ethics.
2) Go local when you can. If they are a solid loan consultant they will know the market and what is realistic.  Also if what they say does not match up to what you discussed you know where to find them:)
  • July 15 2009
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This is not an issue of numbers.

It's an issue of trust.  At the start of your finance project, you do not trust any of the people you are talking to.  It won't get better.

A Good Faith Estimate is not like an estimate for other types of work such as a home remodel.  The GFE is confusing and can be manipulated.  The rate on a GFE, the most important thing, is likely to change.

Identify the three most important things for you in selecting a lender: price, trustworthiness, stability, automation, reputation, etc.  Then pick the one you like.  With that person, delve deeply into price and process.

You may want to look into a group called The Upfront Mortgage Brokers Association.

Good luck
  • July 12 2009
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I agree with the comments made by loan experts.

Review good faith estimates, but also realize that until the loan closes, lenders have different underwriters, along with 'wiggle room' to justify making changes to what they initially propose.
  • July 12 2009
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The risk is one may not deliver.  Cheaper is not always better.  It is a good deal provided it closes that way.
  • July 12 2009
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Speak with the lenders you are interested in doing business with and ask them to prepare and send you a written good faith estimate.  I would go with the lower fee lender, but you must qualify for the mortgage and you need to give the loan officer the ability to speak with you before assuming you will get pricing engine rates and fees. 

Technology is a beautiful thing but it does not replace the human element.  I understand that some of the automated rate quotes are pricing loans for a lender named Provident who's rates are the best in the industry.  Provident has a reputation for cherry picking borrowers and properties and not all loans qualify for their high standards.  To Provident's benefit, their default rates have always been well below industry standard, but they tolerate no risk in their servicing portfolio.
  • July 12 2009
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