Banks or Credit Unions for lending purposes?

[Tuberoller]

Money management is my weakness. I don't mind earning and spending it but anything other than my stock trading hobby is bad news when I'm involved. I'm embarassed to admit that I've never filled out a loan application and have never personally applied for a loan. My wife did all the dirty work when we bought our first house and we've never borrowed since. Whenever I did business lending for payroll the banker always did everything, except for the signature, over the phone. Todd the Vinyl Junkie can tell you how much fun it is to deal with nit-wits like myself who don't use credit cards.

Anyway,I need to a loan or mortgage to buy the condo I'm living in and likely the two adjacent condos so that I can rent them out and control who lives next to me to some extent. I can pay cash for one of them but I certainly can't for all three. I've been doing some minor research but I'm suffering from information overload. I also posted at one of the financial forums and found the place to be over-run with shills and brokers. I got no less than 200 PMs(which is my limit) when I asked this same question. Who generally has the best deals on loans,Banks,Credit Unions or other lending institutions? What are some of the fees and why are there so many of them? What can I do to get the best rates outside of having good credit? Have any of you ever dealt with any of the online lending institutions like E-loans? Is there a net forum I can visit that any of you trust to ask these questions?

I have a signed contract for only the condo I'm living in and I have a closing date in a few weeks. I am renting one of the other condos as well and the owner has agreed to sell. The third condo is also for sale but the owner has to give me right of first refusal in accordance with resident rules even if my offer only matches her best. She hasn't accepted any offers yet(prices here are completely rediculous) but time is a factor.

Thanks in advance for any help.

 

[plus_c]

Quote:

Originally Posted by Tuberoller Money management is my weakness. I don't mind earning and spending it but anything other than my stock trading hobby is bad news when I'm involved. I'm embarassed to admit that I've never filled out a loan application and have never personally applied for a loan. My wife did all the dirty work when we bought our first house and we've never borrowed since. Whenever I did business lending for payroll the banker always did everything, except for the signature, over the phone. Todd the Vinyl Junkie can tell you how much fun it is to deal with nit-wits like myself who don't use credit cards. Anyway,I need to a loan or mortgage to buy the condo I'm living in and likely the two adjacent condos so that I can rent them out and control who lives next to me to some extent. I can pay cash for one of them but I certainly can't for all three. I've been doing some minor research but I'm suffering from information overload. I also posted at one of the financial forums and found the place to be over-run with shills and brokers. I got no less than 200 PMs(which is my limit) when I asked this same question. Who generally has the best deals on loans,Banks,Credit Unions or other lending institutions? What are some of the fees and why are there so many of them? What can I do to get the best rates outside of having good credit? Have any of you ever dealt with any of the online lending institutions like E-loans? Is there a net forum I can visit that any of you trust to ask these questions? I have a signed contract for only the condo I'm living in and I have a closing date in a few weeks. I am renting one of the other condos as well and the owner has agreed to sell. The third condo is also for sale but the owner has to give me right of first refusal in accordance with resident rules even if my offer only matches her best. She hasn't accepted any offers yet(prices here are completely rediculous) but time is a factor. Thanks in advance for any help.

Where are you in the country? Check with some local banks, they usually have some good rates. Rates are important, but just as important is customer service - will your bank sell off the servicing to someone else? If they don't, are they a good bank to deal with? If you have a bank that you trust for other financial needs, it would be a good, safe bet to go with them again. Another good place to check out is ING Direct - I hear they have really good rates.

If you're in the Southeast US, I can heartily recommend SunTrust Mortgage without hesitation. While rates aren't the absolute lowest, SunTrust won this year's JD Power survey for mortgage servicing. (Disclaimer: I am a former SunTrust Mortgage employee.)

Other than shopping around, here are some considerations that will affect your rate and payment:
1. Are you looking to keep these condos long term? ARMs tend to have lower rates than traditional fixed-rate mortgages. If you're not planning on staying in this property longer than 5-7 years, a 5/1 ARM or a 7/1 (number before the slash indicates how long the rate is fixed, number after denotes how often the rate adjusts after the fixed-rate period) will cut a bit off your payment.
2. Do you want to build equity? Equity in your home could be a good way to balance your portfolio. If you're not looking to do that, maybe consider an interest-only loan product. (Again, these products are better for if this isn't going to be your last house)

Please feel free to email me or PM me with questions - if I can't answer them, I can refer you to someone in the mortgage industry who can.

 

[daycart1]

I like credit unions. They won't give you a killer great rate, but you can be sure they won't gouge you on stupid add on charges and the like. They are not in it for profits, so they have no incentive to cheat their members.
Sometimes CUs farm out big items like mortgages. In that case, I'd trust their recommendation, but it wouldn't be as good as working directly with a CU. I think at my CU, the loan officers are not on commission--that could be something to check as well.
Good luck!

 

[cpw]

Hey Tubes.
I deal with lenders everyday and can tell you some basic differences between banks and credit unions though this doesn't necessarily all apply to mortgages and some of these differences may not have any real-world meaning to you:
1)Credit Unions will almost always have better interest rates because the profits go back toward loans for other members. There are plenty of exceptions to this. Big mortgage lenders like Washington Mutual and Countrywide are often just as competitive.
2) Credit Unions often do something called cross-collateralization. This can be important for people who have several things financed w/ the same C.U..
Let's imagine that the worst happens and you have a major medical issue and fall behind on the payments of your motorhome or watercraft. Even though you are not in default on your car or your mortgage, the C.U. can declare all notes due immediately and you could find yourself w/out car or worse. Like I said, this may not apply to you.
3) In the past, lots of C.U.s didn't report to the credit bureaus so even though you were paying well on your loans, you weren't getting recognition for it that would help you get other loans w/ other lenders. Not so common anymore, especially w/ larger C.Us.
4) Some credit unions have commitees that decide who gets loans. In some cases, these are other members. This can be a bit touchy in CUs where the requirement for membership is based on employment (ie. all members are firefighters). You might have someone reviewing your application with whom you don't want to share your personal info. Also, these commitees may only meet every so often so you may have to wait for an answer.
All this said, alot of this stuff doesn't apply to modern CUs and they can be a great deal. Just some issues to be aware of that may help you ask the right questions.
Good to hear from you.
CPW

 

[plus_c]

Hm, I didn't know that about credit unions, probably because I'm a bank guy. Learn something new every day. A lot of credit unions, however, will sell their mortgages off to another bank, simply because they don't have the reserves to hold them in their portfolio. (A lot of small banks do this as well.)

It probably won't have too much of an impact on you, but you may want to take into consideration the likelihood that your loan may end up being serviced by a larger bank anyways, even if you go with a CU. The larger banks tend to retain servicing, but "securitize" the principal and sell it to secondary investors like Fannie Mae and Freddie Mac. You wouldn't ever see the effect of this securitization, except in that it makes the market more liquid and makes more money available to lend out.

 

[KYTGuy]

Recently went through the refinance wringer, Tubey...

Don't actively (fill out papers) at a lot of places - mucks up your credit rating.

same with E-loan - if you start the process with them, they send out multiple apps to multiple banks, and causes multiple hits to your credit rating...

Wherever you go, ask if the note will be sold for servicing by another institution - MAJOR pain in the A** - you just get the auto payment set up, and then you start getting non-payment notices from someone you don't know, and the money you already sent is lost in Hilbert-Space for months!!

I went with Washington Mutual - they gave me a good rate, and no BS...

Best of luck

Big Ugly Guy

 

[cpw]

Most mortgagges are sold before your first payment comes due. No biggie. Just expect it. a friend of mine owns a really big mortgage company and they sell 100% of their loans. Unless you're dealing with a Countrywide or WaMu, etc. you should just expect that it will be sold off and serviced by someone other than the originator.
CPW

 

[Canman]

Quote:

Originally Posted by cpw Most mortgagges are sold before your first payment comes due. No biggie. Just expect it. a friend of mine owns a really big mortgage company and they sell 100% of their loans. Unless you're dealing with a Countrywide or WaMu, etc. you should just expect that it will be sold off and serviced by someone other than the originator. CPW

This is correct. Generally, banks don't want to take on the risk and low return of residential mortgages.

To get an idea of what rates and fees are, check GMAC (www.gmacmortgage.com), which is one of the larger non-governmental holders of residential mortgages. They were the purchaser of my residential mortgage which I got through the local bank I work for.

Right now, interest rates are experiencing what is known as a flat yield curve. That means that short term and long term rates are very similar. The result of this is that you will not get a much better rate by buying what is called an ARM or adjustable rate mortgage. (A 5/1 ARM means that your rate is fixed for 5 years and then the rate is adjusted to market every year after that, often based on a 30 year loan) Right now a 5/1 ARM is only an eighth of a point cheaper than a standard 30 year note. If you have any reason to believe that you might keep the mortgage for more than 5 years, it is more than worth it to get the standard 30 year loan. At an eighth of a point difference, you are only paying $125 more in the first year per $100,000 for the higher rate. A 15 year loan will give you about 3/8 of a point difference. This is not much different than a 30 year rate as far as interest is concerned. I would only get a 15 year loan if you are planning on keeping the loan for the full 15 years. You can always pay the 30 year note off in 15 years by paying additional principal every month. This way you are paying 3/8 of a point more to have the option of paying off your loan for an additional 15 years if necessary.

Secondly, if your credit is better than average, there is no reason to pay any points up front on your mortgage. These are percentage points of the loan total paid up front which reduce the interest rate paid through the life of the loan. The rate is never adjusted enough to make points worthwhile, even if they lower your monthly payment.

Here are some fees to expect:

Title insurance: This ranges depending on the purchase price of your condo. This is required by all lending institutions to protect your legal claim to your property. If the title of the property is not clear due to pending litigation, most mortgage companies will not close the loan. Expect to pay about 0.5% of the total purchase price. In many states, this fee is set by the state. If it is not, look for the lowest price from a respectable insurer.

Appraisal: The bank will require a professional appraisal by an appraiser of their choice to guarantee that their loan to value is appropriate. Cost ranges, but condos are generally between $225 and $250. You can ask to pay the appraiser directly, but more often than not this is not a negotiable cost.

Commitment Fee: This is a bank fee to cover admin and underwriting. Since this is not the only source of bank income, this fee is negotiable. Expect to be charged around $350, but you might be able to negotiate to $100.

Flood Search: A flood search is required by the federal goverment. If your property is in a flood zone (determined by FEMA maps) you will be required by your insurance company to purchase flood insurance. If your condominium is located in a flood zone, you might be covered by your condiminium insurance which you pay for in your monthly condo dues. This search should be around $30.

Credit search: This search costs the bank $2. They charge you between $15 and $20. This fee is negotiable with many lenders.

Pest inspection: This service is required by most institutions to guarantee against termites. Expect to pay $75 directly to the inspector.

Engineering inspection: This is for some schmuck to come and tell you that your appliances and HVAC work. I think this is optional but I don't remember. You know more than these guys do, so you probably don't want to pay the $200 if you don't have to.

Transfer Taxes: This isn't a bank fee but will be collected by the title company at closing depending on the local and state tax. Some states only charge upon purchase or sale, some states do both. In Philly, transfer tax is 4% each to buyer and seller!

Good luck! Don't hesitate to ask any questions.

 

[dariusf]

Hi Fred

The best place for finding good rates is www.bankrate.com Be carefully as many lenders overcharge alot for closing related costs so you need to get lots of quotes. After a search last time I refinanced about a year ago, I decided to go with ING www.ingdirect.com The had a very good rate at that time with very small closing costs. The charge for the appraisal was only about $40 comparing to up to $400 I was quoted at some place. The whole process was excellent as I filled out their online applications and got the papers FedExed over the next day and a closing in our house in about a week time. The rate I got was 4% for 5 year ARM. I went with the ARM as I knew we would be selling early in 06. With the way things are going now I would not go with ARM unless you are going to sell in that time or pay it off. I will definitely go with a 5 year ARM as a refinance to our construction loan once we close the new house in a few month but it all depends on your personal situation. About 80% of the mortgages get sold to Freddie Mac and Fannie May and then they repackage them as mortgage backed securities (RMBS).

Good luck
Darius

 

[dariusf]

Quote:

Originally Posted by Canman You can always pay the 30 year note off in 15 years by paying additional principal every month. This way you are paying 3/8 of a point more to have the option of paying off your loan for an additional 15 years if necessary.

Thats an excellent point which I think many people don't know or think about. I have been double paying every month for about 5 years now and it had a tremendous effect on the term of the loan and the overall total cost.