Real Estate and Home Mortgages - Mortgage companies vs. Banks

Hi everybody,

I'm a first time homebuyer and have question about the places I can take the mortgage from.

There are 2 options: mortgage companies and banks.
Mortgage companies' rates are better(I'm talking about 30 years fixed.. that's the mortgage I'm planning to take) however, some people tells that bank's mortgages are secure even if they are rates are higher.

Is it any potential risk to get it from the mortgage companies?

I'm planning to take 385K mortgage with 5% downpayment... May be it will be 2 mortgages or may be PMI....

Can somebody give me any advises, please?

There is essentially no difference, certainly not in security.
Mortgage bankers and brokers, you know they won't be servicing the loan. Banks may service it, but will retain the right to sell it to someone else for servicing. However, ALL loans will be underwritten with the same basic guidelines, for loans like you describe, to be sold off on Wall St. in strips with other, similar loans. Your bank may still be where you make your payment, but in the end, the loan is treated the same.
That isn't to say that banks won't offer competitive rates, or that brokers will always beat out banks. You might go to 3 different lenders and get 3 different rate and fee structures.
In the end, you just need to do your shopping. Call banks, brokers, mortgage bankers and ask about rates AND fees---asking for rate alone tells you nothing. Ask what they offer for a qualifying conventional loan of whatever your loan amount is. Ask for a rate with no points or origination fee, and then ask for a rate with a 1% fee (discount points and origination fees are pretty much interchangeable terms now). Then call the next place on your list.
Make your calls in one sitting. Rates can change DURING the day, so the only way to get a good idea of who has the best offering is to compare all at one time.
If a lender refuses to give you this info before you apply and they pull credit, just move on to the next one. Do not go with anyone that requires you to pay more than maybe $20 for the credit report. Never pay just to apply.

If putting down 5%, you'll probably want to go with an 80/15 loan set up. 80% first loan, 15% second loan (at a higher rate) and then your 5% down. You have to compare rates for this loan set up vs. a straight forward 95% loan. You need to be getting rates as well as principle and interest payments. Compare the payments with the 80/15 to a 95% loan with PMI. The 80/15 should be a little cheaper each month, despite the higher rate on the 2nd loan. Do the math, that way you'll know what is best.

Post questions here as you go, I'll try to answer any questions I can.

That isn't to say that banks won't offer competitive rates, or that brokers will always beat out banks.-

I've just checked www.nocommerciallinks.com and found out that mortgage companies rates are cheaper...
Is it a good comparison web site?
I live in NJ

Thank you, Bill.

Actually sites like that ___rate.com do not offer realistic information on rates. There ARE some good articles on sites of that nature, but do not forget that the intent of these places is to generate leads for mortgage companies and banks that pay exorbitant fees to be listed there. That money has to be recouped. They are also under a lot of pressure to snatch business from the other dozen or so lenders mentioned. You see a wide variety of rates don't you? Sites like that are also notorious for rates and APR's that range from slightly off to blatantly ridiculous. There are loopholes in the regulations for determining APR that many lenders exploit to make their offers look good in APR comparisons. If they do not charge "points" and no "origination fee" but they invent a term such as "loan placement fee" and charge thousands for that, it doesn't affect APR since a "loan placement fee" is not mentioned in Reg Z. That makes it misleading. There is no way for sites like that to actually know rates and fees offered around the country as they claim. All they can know are the practically fictional rates offered by those advertising on their site. That's why the average rate you find on these sites is about .25% or so lower than what you get in real life.
Feel free to get information from the articles, but don't take the rates shown as gospel. They have a lot of advertising fees to recoup from their borrowers. ;)


...correct, that's not to say banks don't compete with brokers. There is also the personal factor to deal with when working with brokers: some simply want to make too much money on a loan. You have to do your homeowork and shop around to find the best rate, fee *and* person to work with. I have friends at local banks here that are very competitive with a majority of brokers and the national lenders. Also, working with a local bank, broker, mortgage banker often means things will go smoothly since you can put a face to the name. We get a fair amount of business from people that have been disgruntled with online lenders.

Take who ever has the best rate and lowest closing costs. Mortgage companies and a lot of banks usually don't hold their own paper. They will sell your mortgage to another company. Over the course of a 30 year mtg, it might sold many times.

Good Luck!