Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

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jkushne1
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Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by jkushne1 » Thu May 21, 2020 9:35 pm

First time homebuyer (Physician) on Eastern side of Pennsylvania. Family/financial situation stable and mortgage < 1x 2019 income (although 2020 will be reduced from COVID). Have been in the process of shopping mortgages through WCI/Physician philosopher/local lenders/real estate agent recommendations, etc...
-Current best offer: 2.875% fixed 15 year rate at a local bank with no processing or additional lender fee. Bank was recommended by my real estate agent who happens to be family friend for 25+ years and has used this bank for her own mortgage, her kids mortgages, and has great relationship with the bank's mortgage VP throughout the process. So given her own family mortgages she has clearly endorsed their product and knows their service level (and there is no kickbacks or anything along those lines). I have no previous relationship with them other than applying for this mortgage. After lots of comparison shopping, had started moving forward.
-New offer: in the 11th hour after I made decision to pursue local bank, SunTrust got back to me with 2.625% fixed 15 year with $995 processing fee. Have not spoken to the representative yet and plan on doing so tomorrow (got info from one of the physician website recommendations).

I'm curious thoughts of the group on which to pursue as I think they are both fantastic options so no wrong decision given those rates. Suntrust is obviously cheaper if math correct (~68/month = 816/year = 12,240 for full 15 yr) but does have initial extra ~1k fee, there are no local branches to do things in person and there is no relationship with my real estate family friend if that matters. Not sure how much additional business I'd do in the future with the local bank but my guess would be minimal. I guess my question to the group is how much some of those other factors matter or does it really come down to price and that's it. ~12k less the processing fee difference is significant but it certainly won't make or break our financial future (~2 weeks of current take home pay) over that timeframe...plus the difference may be even less if we pay off mortgage early and FIRE.

Thanks

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whodidntante
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by whodidntante » Thu May 21, 2020 9:48 pm

I'm not loyal to any bank. They certainly are not loyal to me. I will take the deal that is best for me at the time. They might even sell the loan right after closing to take profits, rather than keep the loan on their balance sheet.

It's worth comparing all costs and negotiating. They really hope you won't ask so ask. I have found that closing costs vary considerably and I would ask Suntrust to waive their fee. I doubt a background check with a drug test would cost a grand, so what are they doing? That sounds like a "profit fee" to me. Also, make sure you are understand the points you're paying or they're laying.

And take the best deal. These people are not your friends. This is a straight up business deal and I recommend you treat it as such.

jimmy2040
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by jimmy2040 » Thu May 21, 2020 10:12 pm

I agree. they all work with Fannie Mae and etc.

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willthrill81
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by willthrill81 » Thu May 21, 2020 10:13 pm

whodidntante wrote:
Thu May 21, 2020 9:48 pm
I'm not loyal to any bank. They certainly are not loyal to me. I will take the deal that is best for me at the time. They might even sell the loan right after closing to take profits, rather than keep the loan on their balance sheet.
:thumbsup Ditto that.

I don't know why you would care who auto-drafts your mortgage payment every month. When I worked in mortgage customer service, at least 95% of customers' questions were things that you could easily see online (e.g. insurance amount paid, tax amount paid, explanation of escrow payment). Most intelligent people will never need customer service from their mortgage servicer other than maybe contacting them to arrange a payoff.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

CascadiaSoonish
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by CascadiaSoonish » Thu May 21, 2020 10:24 pm

FWIW we've tried hard over the years to give as much preference as we could afford to the regional bank we've used for years, but they haven't made it easy. Interest rates were never quite as competitive, loans were harder to get, reps weren't as proactive, that sort of thing. We ended up doing business more than once with one of the megabanks with a bad reputation.

On the one hand, there's the argument to be made for having a strong relationship with a local bank. But if the bigger banks are aggressively courting deals and are easier to work with, hard to say that it makes sense to stick with the locals. Particularly if the locals can't follow through on delivering 'value' from the relationship in the moments when it really counts.

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BrandonBogle
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by BrandonBogle » Thu May 21, 2020 11:30 pm

I would concur with others. This is business, not friendship -- treat it as such.

That said, before you jump on the Suntrust train, be sure that the ONLY costs (outside of prepaid) is the $995 processing fee. No title fees, no lawyer/settlement fees, no cost appraisal, etc. Make sure they aren't saying "no lender fees" except the $995 processing fee. That would mean you still pay the third party fees listed above. The same would apply with the local bank.

If all that holds true, paying $1k to save $68 would mean it only takes 14 months to break even and is worthwhile to pay.

softwaregeek
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by softwaregeek » Fri May 22, 2020 1:39 am

I have gotten much more from mega bank than little bank. Mega banks have more perks and its a myth that all smAll banks have good service.

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czeckers
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Re: Mortgage: home town bank with slightly higher rate vs large bank with lower rate?

Post by czeckers » Fri May 22, 2020 3:30 pm

Most small banks and oftentimes large banks too will sell your mortgage to someone else. As a result, the company servicing your loan won't be the one that you originated the loan anyway. Go for the cheapest loan you can find.

Bankrate.com is a good place to start
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