How did mortgage HAPPEN so quickly?

September 19, 2008 7:36 AM

How late is too late to negotiate with mortgage broker for fees? And how can I track mortgage interest rates to get a better rate before closing?

I'm in the process of buying a home (I hope!). I shopped around for mortgages and about Sept 4, I found one with a great rate (5.875) that was otherwise better than any of the other packages offered to me by other mortgage brokers, my credit union, found online, etc. I locked in that rate, and one thing seemed to lead to another, and now my mortgage broker has done all kinds of work for this mortgage (appraisal, gotten title company researching the title, processed our paperwork), etc. I have the GFE. But nowhere in there did I have a conversation with her about which fees might be negotiable, and I'm feeling like an idiot.

She also says if rates go down between now and closing (mid-Oct), she'll give us the better rate.

She is really nice, has a good reputation, and is a friend of a friend.

I'm in DC.

So the questions are:
(1) How late is too late to keep shopping for a better deal and go back to this mortgage broker and ask her to lower her fees?
(2) Mortgage rates seem incredibly varied by location and personal finance details. Is there any way for me to track mortgage rates and figure out when mortgage rates go lower than they were when she gave us the 5.875 rate so that I can proactively approach her and ask for a lower rate? (I have been to bankrate but it seems very general.)
(3) Any special tips about home buying in DC would be appreciated as well.

posted by Amizu to Home & Garden (5 answers total)

It's not too late to negotiate the fee until you actually sign the loan. You should have had the conversation up front, but you can still have it now. Your main issue is whether you have any leverage; if you don't like her fee are you prepared to take your business elsewhere? Right now is a very volatile time in home lending. On the one hand, your broker is probably grateful to have a client. On the other hand, you're probably grateful to get a loan at a good rate and with an orderly process.

The other complicating factor is mortgage broker fees are very opaque. Loan signing is a raft of fees, from a small but inflated $75 for a courier to complete garbage $2000 "miscellaneous fees". But those are the fees easy to understand, the hard part is whatever kickback the mortgage broker gets from the lender. It's common for the broker to get a percentage of your loan as a commission. Sometimes that shows up as a point, sometimes it's invisible.

FWIW, I've bought three mortgages via brokers in the past seven years and don't understand what I truly paid for any of them. End of the day I was left feeling if I'd negotiated harder, I could have saved about 1/8% of the cost of the loan, either as a rate or as an up front fee.
posted by Nelson at 10:28 AM on September 19, 2008

What mortgage broker fees? Mortgage brokers buy money wholesale and sell it at retail. That's how they get paid. It's kind of like dealer hold-back on a new car transaction. The other fees you mention - title insurance, appraisal, etc. - can be passed along to you at no markup. That's what our mortgage broker did. You are not obligated to use their appraiser, or their title insurer, though most people do as a matter of convenience.
posted by fixedgear at 11:43 AM on September 19, 2008

When we bought our current house, we worked with three different brokers: the one suggested by the real estate agent; one referred by a colleague; one connected to a student loan servicer. We informed all three that we would be shopping the loan with other brokers.

I ran terms by two of the three up until three-four days before we signed the docs, shaving off points and fees all along the way. The student loan affiliated broker bailed early: "Nope I can't beat either of those deals. Good luck!" The Real Estate connected broker finally won out, but the colleague-referred broker put up a hell of a fight.
posted by notyou at 11:44 AM on September 19, 2008

Response by poster: We've already signed the documents to apply for the loan. And locked in the rate. (Were pre-approved a while ago.) The mortgage broker says the loan will be approved next week.

The fees I'm talking about are the lender charged fees (the ones in the 800s).
posted by Amizu at 2:48 PM on September 19, 2008

Every loan has a different set of fees; the actual rate, any originating points, and any garbage nickle and dime fees like couriers, "miscellaneous fee", etc. Some of the fees you pay end up at the bank, some end up in your mortgage broker's hands, and some go to third parties like title companies. Hopefully your broker picked the cheapest overall loan for you, not just the one with the lowest rate. Your broker should be willing to explain all the details to you if you ask. A specific question to ask is "how do you, the broker, get paid?".

I should have answered #2 of your question before; how to do your own shopping for rates. The mortgage market is frustratingly opaque, but I've found that Bankrate has a useful tool for scouring the mortgage market. You have to be very careful to enter all the details correctly, and even so you'll get some offers that turn out to be too good to be true. In my market I'd find about 10-15 different loans show up; I discarded the two cheapest and then told my mortgage broker I expected them to get close to the third.
posted by Nelson at 5:56 PM on September 19, 2008