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Jun 18

Should I get my mortgage where I bank?

Choosing where to get your mortgage based on where you have a checking account can be a bad move.  Some people have the misconception that the bank will give you a discount on your mortgage if you have a checking account there.  Unfortunately, this is not true.  Banks treat the mortgage as a separate transaction. 

If you want a safe place to store and access your money, an FDIC insured bank is the place to go.  But when you’re making the decision on where to finance your house, going directly to the bank can be a major mistake….Here’s a few other reasons why:

  1. If you’ve ever had any NSF or overdrafts in your checking account, that may hurt your chances of getting approved at that bank.
  2. A bank is going to be limited to the programs, guidelines and products that THEY offer.  This could hurt you as a borroer.  For example: When the USDA Rural Development office came out with a warning that they expected to be out of funding by April 2010, one of the major banks made the pre-emptive decision to stop doing those loans on March 15.  Of course it’s important for the bank to put policies in place to watch their own back.  They need to monitor risk, and keep their stockholder’s best interest in mind.  But what about for individual borrowers?  Well, if you went directly to that bank, a USDA loan wouldn’t have been offered to you, even if was the best deal for you.
  3. Another potential problem is limited rates: I have relationships with multiple banks on a wholesale level, and let me just tell you, no one bank has the best rates every day.  The lender offering the best rate is changing all the time, sometimes several times throughout a single day.  So again, the “best rate” is a moving target. In fact, to stay on top of it on a daily basis, I subscribe to a service to monitor interest rate movements and how lenders respond to them.  It’s pretty interesting to watch how on any given day, some lenders respond to the market by lowering rates, while others are raising rates based on the same news. Like I said, it’s a moving target.  So what’s important when choosing your mortgage lender is to make sure whoever you’re dealing with has access to the best rates.  That’s how I essentially work as a personal shopper for the clients I work for.
  4. Lack of professional advice.  Buying a home is likely the largest financial decision of your life.  Likewise, the mortgage is the largest debt you’re likely to incur in your life.  It’s too big a deal to trust to an order taker in a bank branch. 

That reminds me of a couple I worked with recently.  They came to me because the house they wanted was $225,000.  Their bank told them they were only qualified for $150,000.  Well, I like to tell people to talk to me before you let anyone tell you that you can’t have what you want.  I’m all about helping people get what they want.  What I’ve found is that when people come to me about a mortgage, what they really want is peace of mind that:

  1. they’re making a good decision, and
  2. that they’ll be comfortable  with their life & finances once they finish the process and start making the payment.

Well, in this case I was able to help the couple qualify for the house they wanted by rearranging their finances a little bit.  They came in planning to put 10% down on the purchase.  What I had them do instead was use about $12,000 to pay off the balance of their car loan.  That knocked out an $800 monthly payment, which helped them qualify for the bigger house on an FHA loan with a smaller down payment. 

Want to know the best part?  Their total monthly payments ended up being LESS on the bigger house than they would have been when you factored in the smaller house for $150,000 plus the car for $800 a month.  So they ended up getting the house they wanted with less money out of pocket, AND their monthly finances actually improved. 

Again, I firmly believe a mortgage is too big a deal to trust to an order taker in a bank branch.