Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays.
I recently received an e-mail from a reader who was wondering how to select a mortgage lender. More specifically, he wanted to know:
“If bank A offers me a certain APR with roughly $3,000 in closing costs, while bank B offers me a lower APR with roughly $3,000 in closing costs, but bank B is a no name bank, which do I pick? In the end, a contract is a contract, right? If I sign with ‘Joe Blow Bank’ and they loan me X dollars at the lower APR, should I go with them? Or should I remember what my mom told me? If it sounds too good to be true, then it probably is.”
Personally, the only factors that I really pay attention to are the mortgage interest rate, lender’s fees, and closing costs. We’ve generally worked through a mortgage broker, and haven’t ever thought about who would ultimately wind up underwriting our loan.
In fact, it’s very common for mortgages to change hands within a few months of origination. As such, it’s not like you really get to choose who will end up servicing your loan, anyway.
Just be 100% sure that you’re comparing apples with apples… For example, adjustable rate mortgages (ARMs) typically have low initial rates that will move upward after three, five, or seven years. In the case of fixed rate mortgages, shorter term loans typically have lower rates than longer term loans (e.g., 15 year rates = 30 year rates).
Assuming that you’re being offered truly equivalent products, I’d focus on the financial details rather than sweating the name of the bank. Of course, you’ll want to be sure that your prospective lenders are legitimate outfits, so go ahead an check them out with the Better Business Bureau, but… Don’t let name recognition (or lack thereof) push you into a more costly mortgage.
If you have anything to add, please share your thoughts in the comments.
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math (693)
- Dish Network Customer Service SUCKS (537)
- $8,000 Homebuyer Tax Credit (429)
- Pay Off Mortgage Early or Invest? (424)
- How to Claim the First-Time Homebuyer Tax Credit (352)
- Termite Control: Sentricon vs. Termidor (330)
- How Much Should You Pay a Babysitter? (292)
- Ethanol Blended Gas = Lower Mileage? (273)
- Reduced Credit Limits? Share Your Experience (256)
- $15,000 Homebuyer Tax Credit (242)
- Buying Furniture off the Back of a Truck (237)
- Will Mac OS X Lion Kill Quicken 2007? (191)