Would you ask a lender to match a different lender's rate?

24 Replies

So in short, I wanted to make an offer on a property sooner than later. I had asked the lender (by phone call and email) I had worked with recently for a refinance. After waiting approx. 1.5 days without a reply, I asked my broker who was going to be putting in the offer if he had any recommendations. I talked with a nice lady at a small community bank, who told me they had a special where they will be offering the same rate whether I wanted to do a conventional loan or portfolio loan. Sweet, I thought.

After I sent in the required docs, the rate for a 20% down loan was 4.5%, whether conventional or portfolio. So we sent the pre-approval letter to my broker to include with the offer. Later on that evening (like 12:30AM), I get a pre-approval letter from my original lender, 4.0% rate for 20% down. Hmm, that's 0.5% difference, huge in my book. So two questions I was hoping you guys can comment on.

1. When push comes to shove, is it okay to ask the lady at community bank if she can match my original lender's interest rate? They probably can't, but who knows. Also, I did mention to her that I hadn't heard back from my lender so I was calling her to expedite the offer.

2. If faced with the option of a portfolio loan at 4.5% vs. conventional loan at 4.0% percent, which would you choose? Assume that you are well below the limit of 4 or 10 for conventional loans.

1. Absolutely. Compare their fees as well. When I purchased my personal home I found a lender that was $1000 less in fees and about .5% less on interest. I gave the original loan officer the chance to match and he dropped his fees but couldn't quite match the rate. He lost my business.

2. I'm not experienced enough to give a good answer on this but having this loan on a portfolio could benefit you in the future by not counting against your Fannie Mae limit...

Always ask them to match! Business is business! People switch loan officers all the time between officer and closing!

As for your second question, conventional tap out at 10 loans per name. So what's your long term goal? Our goal is to buy as many houses as possible so if a conventional didn't "count" against us than that's awesome! On the other hand their rates tend to be higher. So you might want to keep her in your back pocket. Max out your conventional and than go from there with this community bank!

@Elizabeth Colegrove 

Is it 4 loans or 10 loans with conventional?

I think I will ask her if she can match the rate, and if not, I will have to go with the original lender, but that will be a conventional loan. Are there any downsides at all to using a portfolio loan rather than conventional?

Conventional is 10 loans, 4 loans is easy, after that it is more difficult but possible. 

Portfolio are typically considered commercial. They aren't regulated under freddy and fanny so they don't have the same protections but they also do n't have the same rules. Therefore it is very institutional based. They also tend to have higher rates ;)

I have done this several times but I go in before I get close and ask for quotes from several banks, then I go to the one with either the lowest interest rate or lowest loan origination fees and ask if they will match or beat the lowest rate from either of them from another bank.  I was doing business with 3 banks at the time and it kept my costs lower.  If one bank had the lowest loan origination fee and lowest interest rate they of course got my business.  Lately I had to do a very big loan to buy a partner out, and so have been using them exclusively.  they do their own in house appraisal so that saves me money and they have not questioned my getting the seller to take a 2nd mortgage behind theirs.  It takes longer now for me to get a loan approval though because it takes a committee to approve it.  I don't know if that is good or bad hehe.   Sooner or later I expect to hear we cannot approve another loan, but so far so good.

Todays mortage quotes are very interesting, Dodd Frank passed leg in 2010 to protect the consumer, but in reality they figured out work arounds to still confuse the borrower, 

here is my advise. get the GFE, this cannot vary more than 10% by law or else, or else they dont get the loan. big woopie. my advise is to give the lender as much **** as possible on the 4.5 tell them you can get it for 4.0 and tell them to f off if they cant match it. 

i am told by law everyones rates and fees are the same. ya right, they are not. federal vs. state laws. f the banks and lenders. get the best rate by searcing and asking questions.

@Jared Benson  it won't matter whether it is a portfolio or not the 4/10 limits apply to number of financed properties. So 10 properties on 1 blanket loan counts as 10.

@Andrey Y. I'd ask, it can't hurt and if she says no you can still decide to go with her to build the relationship or because their fees are lower ect. As far as conventional vs portfolio, it may not really matter. It probably really will only matter in the aspect of being able to finance beyond the conventional limit, or being able to finance a property titled under an LLC. If it's under your own name then it becomes less of an issue and really just depends on if you want to start building a relationship with the lender now. (just my opinion)

@Matt Devincenzo  Wait a second, you are telling me that a portfolio loan counts towards the 4 or 10 freddie/fannie limit? Can someone clarify on this. I thought the portfolio loans are kept in house of the community bank so if they deem you are qualified there aren't any "restrictions" like conventional loans have.

@Dirk Smithson  You have me laughing really hard with your post.  By my calculation, 4.0% and 4.5% are off by more than 10%, specifically around 12.5%. So then, is it illegal that it is varying by more than 10% with a conventional loan?

@Andrey Y. yes the portfolio counts....it's a one way street. What I mean by that is the order in which you obtain loans matters.

The 4/10 is a conventional limit for underwriting a conventional (Fannie/Freddie) loan. It isn't that you can get 10 conventional loans no matter what, it's that they can only underwrite a new conventional loan if you don't have more than the 10 financed properties. It doesn't matter what type of loan those properties have it is the limit at which you no longer qualify for a conventional loan.

So let's say you start with a portfolio loan and get 10 financed properties. Even though none of them are conventional, you will not be able to obtain any conventional loans at that point and would need to look at additional portfolio loans. 

Let's say you get 5 conventional loans and then get 5 more portfolio loans. You can't get another conventional loan at that point. You are over the financed property limit that FF will lend at and now will have to pursue portfolio loans for any additional properties.

The second part of your post is right on. Portfolio loans are kept in house so as long as that bank/lender deems you are qualified they can lend whatever their internal policy is. So you are correct that is the advantage. If they decide they can give you 30 loans no problem, it's their underwriting guidelines and they can do that.

Here is the announcement that established the 10 loan max. Below is a quote from it on the bottom of page 1...hope it helps.

The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements as outlined in this Announcement. 

the single best way to compare lenders is through the GFE.  comparing rates alone is an absolute waste of time.  also, when someone comes to me (a lender) and asks for the lowest rate I know I'm dealing with a noob and have a lot of education to provide, which isn't a big deal most of the time. 

rates and closing costs are inversely related.  so if you want the lowest rate, you're gonna need a lot more cash to close.  this is something Bank of America, Chase, Wells Fargo, etc. DONT TELL YOU. 

so simply ask each lender for a gfe.  that's it.  merry x-mas. 

Originally posted by @Patrick Britton :

the single best way to compare lenders is through the GFE.  comparing rates alone is an absolute waste of time.  also, when someone comes to me (a lender) and asks for the lowest rate I know I'm dealing with a noob and have a lot of education to provide, which isn't a big deal most of the time. 

rates and closing costs are inversely related.  so if you want the lowest rate, you're gonna need a lot more cash to close.  this is something Bank of America, Chase, Wells Fargo, etc. DONT TELL YOU. 

so simply ask each lender for a gfe.  that's it.  merry x-mas. 

 Merry Christmas! Appreciate the insight from a lender's perspective.

So lets say this offer gets accepted. Is it then ethical to get a GFE from both of the lenders? And I bet there is something I should be telling the lady at the conventional bank about the other lender's rates to help her earn my business.

Originally posted by @Andrey Y. :

@Dirk Smithson You have me laughing really hard with your post.  By my calculation, 4.0% and 4.5% are off by more than 10%, specifically around 12.5%. So then, is it illegal that it is varying by more than 10% with a conventional loan?

 The GFE from the the same lender has to be within tolerence, that is the 10% rule. If lender A gives you a GFEthe fees  for costs cannot exceed that origonal by more than 10 percent at close. 

Lender B has thier own fees that will vary higher or lower than lender A It doesnt matter if their fees exceed 10% over A, just as long as they dont exceed their own origonal GFE

Lenders these days dont give GFE's in the begining, theyre too time consuming. I think the work around is called a "fee sheet" to me its the same thing, I believe they have printed on the fee sheet " this is not a GFE

I should note that Once an application has been completed by the applicant the lender by law has 3 days to get the GFE to the applicant. some lenders will however not take a full application to avoid problems w/compliance.

You seem to know an awful lot about this stuff Dirk. Given that I'm well below the 10 debt service limit, makes more sense to go with the better rate/terms versus just the portfolio loan.

There's not enough info to advise on that, its also above my pay grade to make that kind of decision, I try to stick to facts, and that would seem to be an opinion for me at this point. It might be better to seek advice from a Financial planner or someone in that area of expertise.

I will say this, a portfolio loan isn't sold on the secondary market, Its held with the bank, they assume more risk therefore carry higher rates. It it were me, and I could get a conventional loan at 4.0 vs port at 4.5 with the same fees/terms Id go with the 4.0 conventional. some things to consider are pre-payment prnalties, fixed vs. adjustable rates. ballon payments. 

My first mortgage was a 30year mortgage due in 15. I didn't understand this and it wasn't explained to me at closing. that was in 1999, I was young and uninformed. So its good to ask questions, but to answer your origonal q: It's okay to tell the Loan officer you have 4.0 offers coming in, but in all honesty without a gfe your wasting your time dreaming about the great rate and fee's. 

Patrick stated that fees and rate are inversely related, and correct he is. You can always look at the APR, this is how to tell the best deal IMO.

Example 1: you can have a 4.0 rate with 4000.00 fees and a APR of 5.125%

Example 2: Rate of 4.5 with 1500.00 total fees APR 4.875

This is why a GFE is Important to match deals. of coarse the above examples are just to give an idea of how apr works they are missing several pieces of info to calculate a real scenario.

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I mainly use one lender, because she makes my life easier and the fees are not crazy.  One text and a pre-approval letter is in the email.  I do the entire loan process through email.  But, whenever I apply for a new loan I check my backup lender for interest rate.  Then I'll ask my primary lender to match.  She knows I'm going to do this, so I usually don't need to do it. 

Originally posted by @Bryan N. :

I mainly use one lender, because she makes my life easier and the fees are not crazy.  One text and a pre-approval letter is in the email.  I do the entire loan process through email.  But, whenever I apply for a new loan I check my backup lender for interest rate.  Then I'll ask my primary lender to match.  She knows I'm going to do this, so I usually don't need to do it. 

 I follow this exact same procedure. I may pay slightly more, but get amazing customer service (which saves me tons of time). Having had very bad experiences, I believe this is important.

And, she always seems to be able to match lower quotes :)

@Michael L.  

Exactly.  It's worth it in the end.  I view time as a commodity and my lender saves me lots of time.  

@Jerry W.   Do you think they work with someone from Hawaii? What kinds of rates/fees are you getting recently.

Do you mean hard money lenders? Or traditional mortgage brokers/lenders for residential acquisitions?

I think he means traditional lenders with conventional terms, the answer it Yes, HI is a US State and any bank can't not lend, there are laws called "red lineing" where banks lend to only certain ares and get in trouble for not lending to those areas. 

There are federal licensed banks and state licensed banks. I believe a federal would be like wells fargo, the federal chartered would pretty much have to lend to you as long as you and property meet guidlines, IE. banks can't not lend based on geographic location.

@Andrey Y.   I am getting 4.5% and 5% at the moment.

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