Updated on February 19, 2016
Many friends have used my research to save time and money on their home purchases and refinance so I thought I would short article with my readers. While it is deal related, its not travel deal related – there are no points or miles discussed in this post.
I was looking for my first home for about 2 years and had 6 purchases that failed for various reasons. Throughout this time, I shopped around with the big banks, small banks, and brokers. In total I must have compared 25-30 lenders over the past two years. Most often, the big banks were a waste of time. Their rates were bad and they were slow – if I could even get connected to the right person. When I contacted Citibank to get a rate quote, I kept getting transferred and put on hold that I gave up.
JUST STARTING OUT?
If you are just starting out, I suggest you scroll down and read the related posts then search online and get a couple quotes to get an idea of what the interest rates and fees look like in your area. Buying is likely the largest and most important decisions you make in your life so it’s a good idea to shop around – regardless of who comes recommended. Especially in the real estate business, I rarely trust anyone (it’s a dirty business but I won’t get into that here) and research everything myself. Whenever any agent gave me a list of recommended lenders, they went to the bottom of my list.
Step 1: Search on google and get a couple of quotes to have a point of comparison.
Step 2: Contact one/both of the lenders I recommended below to get a better offer.
Step 3: Buy/refinance your place.
Step 4: Plan a free trip using miles and awards to undo all the stress this caused you.
MY TOP LENDERS
Scott is a mortgage broker that was introduced to me by a teacher/real estate investor and separately at the same time through a Cornell Alumni message board. He worked with me on about 6 failed transactions before the last one went through successfully. Even though it seemed like I would continue to waste his time, he was always patient with me and my million questions. If you ask, he will probably tell you I questioned and recalculated every single number on every single document he gave me. That would be true. Hey, this was an important decision! Other brokers I contacted did often offer the same rates as Scott, however, he always gave me more credits to reduce closing costs and was able to get everything together to close fast.
Most big banks have terrible rates that don’t come close to what Scott (and other brokers) can offer. This was the one time I discovered a better rate and only the adjustable rate. It does come with a BIG catch. HSBC also has a First Home Club to help first time home buyers with down payment. And because HSBC is a big bank, you will be passed on to a separate person who is a loan processor so things can get very slow, which is a good reason to use them for a refinance only, not a home purchase. If you can't close the mortgage on time, the whole transaction may get cancelled, especially in a fast moving market like the NYC area. Timing is not as critical with a refinance.
The HSBC Catch
You will need excellent credit, open a ‘Premier’ account and deposit $100k (checking, savings, investment and retirement money all count) to be there on the day of closing – then you can take it out. All the cash doesn’t need to be in there for long but at least through the closing date. Yes, it’s a big number but it may be worth moving things over, even temporarily. Don't forget: it’s a big bank with a separate mortgage processing division, so things can get delayed.
For the past few months, HSBC’s Premier adjustable rates were about 0.50% to 0.75% lower than market rates. You can choose a slightly higher rate (still lower than market rates) in exchange for a credit to pay for closing costs. For example, I could have taken a rate of 2.744% for my 7/1 adjustable mortgage but instead choose 2.994% because doing so resulted in a credit from HSBC which covered almost all of my closing costs.
Here is a table to help you decide what is best for you. Mortgages are complicated and have lots of different pieces, numbers, documents, and people involved. If there is interest, I am happy to write more about anything mortgage related but it’s a bit off topic for this forum.
|First time home buyer||X|
|Initial real estate purchase||X|
|Fixed Interest Rates||X|
|Lowest Adjustable Interest Rates (with $100k deposit)||X|
|Lowest Adjustable Interest Rates (without any deposits)||X|
|No closing cost mortgages||X||X|
|Work with one person the entire financing process||X|
|You are buying in NY/NJ/CA/FL*||X|
|You are refinancing in any state||X|
*If you are buying a home in any other state, its best to contact a few local mortgage brokers to get the best deal.
Note: I have no affiliation nor do I get any referrals compensation if you use any of the companies above.
- Mortgages 101: What You Need to Know
- Should You Consider an Adjustable-Rate Mortgage?
- Property 101: What You Need to Know About Buying Your First Home
- First-time Homebuying 101