Mortgage Shopping in Chicago
Part One
I’m in the process of buying a home in Chicago, and as all informed buyers should do, I went to several different lenders to compare their offerings. Money is, after all, a commodity—everyone that sells mortgages does so with someone else’s money, either directly or indirectly, so they’re no competition on product, only the related service.
For those keeping score: I have excellent credit, am putting 10% down, and want a 30-year fixed mortgage. My income can easily support those payments, so there’s absolutely no problem getting financing. The only question is how good my financing package will be.
Less than 20% down in the US means you need either private mortgage insurance (PMI) on a single loan (90%), or two loans (80% plus 10% at a higher interest rate), since lenders won’t front 90% without PMI.
I filled out a form on a website that puts me in touch with a bunch of different lenders, and followed up on referrals from friends and family. Ultimately, there were five contenders.
I gave them a feel for my situation late December and got initial estimates from each. I was very clear with each of them that I was shopping around, so I would expect that they would give me their best offers if they were interested in my business. A couple weeks later, I went house shopping, and got a purchase agreement accepted. I called everyone back, gave them the details, and waited to see what they came up with.
My experiences follow. There isn’t a reproducible methodology here, so your mileage may—and very likely will—vary.
WCS Lending
In my opinion, there’s nothing to really differentiate them from the pack. The rates they were offering were competitive with (though not better than) anyone else, and while I developed a working relationship with my broker there, there was simply no reason to choose them over the others.
I asked for pre-approval letters of vary amounts, which were delivered promptly. My contact there spoke with me whenever I tried to call him, even over the December holidays and after-hours. He was eager to help, but seemed removed from the actual workings of the mortgage market, offering few suggestions and frequently needing to look into a question and call me back.
Chicago BanCorp
The broker I worked with seems to confuse his job with selling used cars. He himself called me a “a lot more savvy than a typical first-time home buyer”, but he didn’t seem to take that to heart.
The initial estimate included four scenarios: with and without PMI, and each of those with and without bank fees. The bank fees totaled $1000, which are somewhat significant, but not that significant considering I’m putting 10% down on a large mortgage anyway. He’d eat the bank fees for me—in exchange for bumping the rate a quarter point.
Does he think I’m stupid? If I’m putting down tens of thousands of dollars already, would I choose to save an extra thousand dollars now in exchange for tens of thousands in more interest? Insulting.
He sent me the document, and asked what I thought. I responded simply that I had been offered a rate .375% lower earlier that day. His response? “I have this conversation ten times a day. If I saw a gas station at $3.00/gallon, and one at $3.20/gallon, and one at $1.50/gallon, something’s wrong with this picture. I certainly wouldn’t put that in my car!” What I didn’t tell him is that everyone gave me a rate .375% lower.
I gave him the courtesy of competing with the others once I had a final address and price. He came back with “I can’t believe how much the market has improved!”, and still managed to be a half-point higher than the others at best (the PMI + bank fees option). I pointed this out, and he offered to reduce by a quarter-point “just for me”, but no more, because then he’d be underwater.
Seriously: used car salesman.
Stay tuned for part 2.
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I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.
I would recommend to Mr. Glynn to search for a mortgage professional in the same manner he would search for an attorney or financial advisor. There are many aspects of debt instruments, after-tax impacts of loan structures and arbitrage strategies that consumers in general know nothing about. There is a reasonable level of planning needed and, generally, the one-size-fits-all 30 ry fixed approach is not a sensible solution after seeing hard numbers on different structures matching your own financial situation. Find the professional first, then compare value.