When I bought my house three years ago, I used LendingTree to get some financing offers to get a better feel for what rates for someone like me. Within an hour or two of when I submitted the request, I had someone from LendingTree call me to tell me they were coordinating the lending offers. Within an hour of that I had a response from LendingTree that included several rate quotes from multiple lenders, I was genuinely impressed with how quickly that process was.

Today was a totally different story. I submitted my request in the morning and it wasn’t until 5 PM that I saw some “quotes” roll in. I put that in quotes because it was one lender with three quotes depending on what loan I wanted. By then I had talked to a local lender and a loan officer from BB&T, where my current mortgage is. The loan offer was from a lender in Kentucky and it was far inferior to the one offered by BB&T (the local lender will get back to me tomorrow). Maybe it’s because we’re so close to the holidays, maybe it’s because we’re in a sagging housing market, or maybe because I’m a weak borrower, but it’s overall a pretty lackluster response.

Here are the offers so far on the table (obviously pending credit checks and whatnot):

• BB&T Mortgage said that I could get a 20 or 30 fixed year mortgage at 4.875% or a 15 year mortgage at 4.75%, with no points. The closing costs, which would include all the document fees, escrow setup, and title insurance BS would run about $3,100 to $3,200.
• SurePoint Lending had three offers – $4.875% on a 30 year fixed with one point, 5% on a FHA 15 year fixed with no points, and 5.25% on a 30 year fixed with no points.

Assuming the closing costs are going to be similar, the SurePoint offer doesn’t come close to the MM&T Mortgage and I’m inclined to stick with the bank I’m already with. I didn’t set up my loan with BB&T, they bought it, but I haven’t had any problems and they’re offering a much cheaper option.

Perhaps tomorrow will bring more quotes but I’m not holding my breath, it looks like the number to beat is 4.875% with no points.

When the Fed dropped its target federal funds rate to 0.00% – 0.25%, one of the other things it said was that it would be buying up long term debt. This, coupled with other moves, has pushed mortgages rates down to the lowest I’ve ever seen in my entire life. Wells Fargo has 4.875% APR listed as its 30 year fixed rate (as of Dec 22, 2008). When I heard about an earlier Treasury plan to take action that would lower interest rates on mortgages to 4.5%, thoughts of sugar plum refinancing fairies danced in my head, but I was reminded of how that was only for new mortgages. The Fed has opened the door for refinances too.

The rule of thumb in refinancing has always been that you don’t want to try it unless the rates differ by a percent or more, it looks like we’ve hit that sweet spot to at least warrant investigation.

Our Mortgage Situation

My current mortgage is $217,488 at 5.875% APR with BB&T and we’re about three years in with minimum payments of $1714.85 a month. Our appraisal was for $299,999 so our current loan to value is 72.5% and we have flexibility to get that value lower. Our home, very fortunately, has not lost value compared to homes sold around us. In fact, in the same strip of townhouses, two homes sold for more than our appraisal price (by about 5-7%) so I conservatively think our house has kept its value despite home prices falling nationally.

Our Strategy

My approach to this will be to check what the actual prevailing rates are by putting in a request with LendingTree, then calling up BB&T to see what my options are with a loan modification, then calling up a few mortgage lenders I know to see what their best deals are. My preference is for a loan modification because those are the cheapest, my number two is working with local lenders because I’ve done so in the past and they’ve been awesome, and the third option is with a “stranger” lender via LendingTree. LendingTree is there mostly to give me a baseline idea of what I should be able to get but you never know what can happen.

I’ll be working on this most of the day and as I make these calls, I’ll write posts throughout the day with updates (and post them to Twitter). If you have any words of wisdom, please let me know either here in the comments, email, or on Twitter. Already, jeffrosecpa told me that some of his clients were getting 4.5% 30-year fixed mortgages with 60% LTV… that’s not bad!

(Photo: thetruthabout

“When banks compete, you win” is a slogan you’ve probably heard recently but is that really true or is that just a clever slogan wrapped around some somewhat clever advertisements? In summary, I think LendingTree offers you a quick, free, easy way to determine what the ballpark rates should be for someone with your credit profile. The fact that it’s free makes their offer compelling, why not enter in your information so you can figure out whether you can get a good rate or just an OK rate.

When I was looking at houses over two years ago, I signed up to LendingTree because of all the advertisements I saw on the television and because I felt that it was a useful resource. It’s essentially a search engine for mortgage loans and while the banks don’t necessarily “compete” in the sense that they are scrambling to beat one another for a loan, it certainly aggregates all the offers in one place so you can compare them easily.

Easily Compare Offers

I think that everyone should use LendingTree because getting those offers is free and because it gives you a general idea of the rates you can probably expect. See, Bankrate is nice with their rate listings but they’re not terribly accurate; getting a series of rate quotes based on your personal information and geographic area will give you a better sense of what’s a “good” rate and what’s a “bad” rate.

Pre-Approval Letter

Another benefit to using LendingTree was that they processed me for a pre-approval letter and I was able to print that out within hours (I want to even say within minutes since in a previous post I talked about how LendingTree called me a little after I submitted a quote). A pre-approval letter is crucial whenever you’re bidding on a home because it shows that you are a qualified bidder (that you’re good for the amount that you bid) and, given how hot the market was in two years ago, so it was definitely a bonus to using LendingTree (even though my loan wasn’t originated by a LendingTree lender).

Lots and Lots Of Offers

This can be a good or a bad thing depending on your perspective but within minutes of applying, I was deluged with mortgage related emails from all sorts of lenders from local banks and credit unions to big national banks that had a presence in my geographic area. Some of the offers included sample rate quotes based on my information, some were just cold call type “hey we’re here, call us,” but in general it was good.

Why Am I Pimping LendingTree?

I’m compensated for each signup but also because I had an email asking me whether I thought LendingTree was worth using and whether it resulted in any spam. I don’t think I’ve gotten any spam as a result of using LendingTree but you can never be certain with those sorts of things. Since it’s a major company and fairly reputable, I’m inclined to think that they don’t sell the lists or do anything questionable. However, considering your information is forwarded to a bunch of banks and lenders, you could perhaps get spammed if those institutions sell your information. Ultimately, who knows… use a good spam filter and you should fine.

Has anyone had a good or bad experience with LendingTree?

ING Direct has been running a promotion for quite some time offering flat $555 closing costs on their mortgages (this promotion will be over at the end of this month, Feb 2006). The reviews on their service has been mixed and I haven’t had first hand experience with ING with products other than their Orange Savings Accounts. But is the $555 flat closing cost promotion actually a good deal financially?

If you’re looking for a fixed rate mortgage, you’re out of luck. ING only offers 3/1, 5/1, and 7/1 adjustable rate mortgages at competitive rates. That alone may make this a non-deal for many but for those of you who are not anti-ARM because of your circumstances, read on.

A lot of various fees and costs are lumped into the term “closing costs” and so it’s sometimes difficult to compare them. When I was looking for a house last year, the fees that were listed as closing costs with LendingTree were a tax service fee, underwriting fee, processing fee, document preparation fee, and credit report fee to the tune of nearly a thousand dollars. (follow the link for a breakdown). ING’s closing costs fees covered by the flat fee include an administrative fee, application fee, funding fee, processing fee, tax service, and an underwriting fee. They calculate the average you’ll pay for those is $1,459 – which is $500 more than LendingTree’s quote about 8 months ago.

What it doesn’t cover are the things that are called closing cost fees but that aren’t actually fees in the sense that you get “nothing” for them. You’ll have to pay the seller whatever utility and tax prepayments they’ve already made and you’ll also have to cover a few other title related fees, such as title insurance which can be pricey.

The reviews I’ve read about ING’s customer service leave much to be desired but that’s to be expected if you’ve ever opened up a savings account with them. They make money because they cut back on their customer service and have lower upkeep costs. If you can handle just sending in a check each month, chances are you’ll be happy with paying $500-$1000 less in closing costs.

Go to this $25 ING Referral page if you want a referral for an ING Orange Savings account, offering a promotional 4.75% until mid-April. If you sign up, deposit $250, you’ll get a $25 bonus and I’ll pick up $10.

The theory behind a credit union is that it’s working for you (and every other member) whenever it operates. That means that as an account holder you get favorable returns on your savings, checking, and money market accounts as well as good interest rates on your loans. The company I work for has a credit union and I opened an account within the first week of working because I knew somewhere down the road I might turn to them for a mortgage. Well, I poked around with LendingTree and two other mortgage-finding services (still only one response!) and it’s about time I talked to my credit union.

This was brought on by the this article, written by Gerri Willis, where she says that becoming buddy buddy with a small bank now may pay off later, when the housing price growth cools down. Basically, when the market slows down and a bank begins to foreclose on homes, the relationship you develop now will put you ahead of the game when the slowdown occurs. The bank won’t want to keep the properties, they’ll want to sell them to you.

Her tip is to first target the right bank, one that holds at least 55% of the mortgage loans it sets up. A bank can sell the loan whenever, it’s in the fine print if you read carefully, and they can’t foreclose on a loan if they don’t own it. After you target the bank, move your finances there to build a level of trust. They can trust you if they see your money! Then, the short article moves into discussing how to target areas and stuff like that which isn’t important to me at the moment.

So my plan of attack now is to talk to some local small banks and seeing if they can give me a favorable mortgage. Right now, the best seems like a 30 Year Fixed with monthly payments of around $1500 on a $250k loan (via LendingTree). If they can give me a pretty good offer and fit some of the other criteria Gerri mentions, I’ll consider giving them my business. But first things first, the credit union deserves a visit.

As I mentioned earlier, I submitted a request to LendingTree at about lunch time today and around 1:30pm, Diane from LendingTree’s “Incubation Department” gave me a call to introduce herself and give me an idea of how LendingTree’s process works. Essentially, she will be the interface/middlewoman between myself and twenty-seven lenders (her number). I don’t know if there will be a premium put on the interest rate for this great service, but that’s what the competing offers from LoanWeb and MonsterMoving (where they don’t get involved, they just give out information) are for.

In talking to Diane, I told her I would want a $250k mortgage for a $300k house with the $50k down payment funded by my own savings and help from my parents. It turns out, when you put down less than 20% and part of it is a gift, you have to show at least 5% of that down payment comes from your own savings. Luckily, I’ll be able to contribute at least $15k of my own funds so I will be in the clear with regards to that.

Diane said a pre-approval letter, which is not binding, would be processed in 24-48 hours once I provided the following pieces of information (which would be used for a credit check):

• 2 Year’s W2′s
• 2 month’s bank statements (or other verification of down payment)
• 1 months pay stubs

I could send it in an email or fax, two very convenient options, but I question the security of the transmission medium. I will definitely not send it across email because it’s not going to be encrypted. At least with the fax, I don’t know enough to know it’s not safe.

I asked her if I could nix out specifics, like bank account numbers and social security numbers (they already have that anyway), and she went into her talk about how the security at LendingTree is good and my information will be kept confidential, etc. I could black it out but eventually, when I really locked in a loan, I’d have to provide it. I think I will black out the account numbers this time around because I don’t want them to have it in the event I go with another lender or if I decide to rent for another year.

Then I thought to check online, there were 9 offers waiting for me. The first on the list was a 7/1 ARM (the product I want) for an APR of 5.91% with HSBC Mortgage Corp. Clicking on Offer Details, I found that estimated fees (Tax Service, Underwriting, Processing, Document Prep, and Credit Report) would be $995 but the fine print indicated this didn’t include:

pre-paid interest (depends on the day of the month you close your loan), real estate taxes & escrows, settlement or closing service fees, title insurance, recording fees, hazard insurance fees and pest inspection. (sheesh!)

I looked at a few of the other offers (A 30 Yr. Fixed from National City had a monthly payment only $60 higher) and one thing I realized was that none of them talked about PMI. I know for a fact that I’d have to get a PMI because $50k/$300k is only 16.7%, under the 20%. I’ll have to call up Diane and ask about getting a second loan to avoid PMI…

As a comparison, I’ve only received one other email with regards to a mortgage from a loan officer from Annapolis First Mortgage. Granted, it’s not LoanWeb or Monster’s fault, they probably just disseminate information to the companies in their network so the chain is longer; but the direct communication with LendingTree gives them a significant leg up. LendingTree seems like a very professional outfit and I’ve been very impressed with them so far. The turnaround time is very important to me because I hate having to wait to get things done.

I’m going out with Realtor today (it’s a friend of mine who is testing for it and a fully licensed Century 21 agent) to look at a few more houses; I’ll report back my findings. One thing I’ve already learned so far is the types of homes I’m interested in are snatched up usually within a week of listing. What that means is that I should get myself pre-approved for a mortgage as soon as possible. If I find my dream house at the dream price and I need to go out and find a loan, it’ll be gone faster than a fat kid going after free cake. So I began my search online for a solid rate and some help on what kind of loan I’ll need.

The first step to getting a mortgage is finding out the prevailing rates and just filling out some online forms. I know I could go to the bank or whatever, but for me, the easiest thing is to go to LoanWeb.com (off Bankrate.com), LendingTree.com (when banks compete, you win!), and MonsterMoving.com and get bombarded by mortgage lenders. I’m alright with a few dozen calls, 75% of which I expect to be noise, from these folks just to see the various pitches. I want to hear some pitches so I can identify what the “keywords” in the language are and how to sniff out the BS.

(Click to continue reading…)