What's up everyone, Spencer Hsu here,
your Tech Realtor of the Bay
Area. Question of the week.
Should you use is a local bank versus
an online bank for Bay Area home loans?
While interest rates are
always very important,
you have to be sure of
these different things.
Before we begin,
if you are tired of
renting in the Bay Area,
are a homeowner looking to do
a trade-up for a bigger home,
or are a real estate investor,
I would love to connect.
Click on the Calendly link and
let's set up a time to talk.
It's never too early to
talk about your options
and work out a game planned.
Let's get started.
Online banks have gained
significant market share
over the years,
claiming to be customer-centric
and streamlining the
entire mortgage process.
They even advertise
some of the lowest rates
you will ever see.
Check this latest ad out
from Quicken Mortgage.
They are offering loans for under 2%
for a 15-year fixed rate,
and they are not the only ones doing so.
They are clearly doing very
well as their parent company,
Rocket Mortgage, just IPOed last week,
making Dan Gilbert the 28th
richest person in the world.
But, should use them for your home loans
here in the Bay Area?
Well, it depends.
Let's talk about home purchases first.
While these online banks are commonly used
in a lot of markets across the country,
they don't do many purchases here
in the core Bay Area for several reasons.
Because of how fast properties move
the time it takes to close
is extremely important here.
They just don't have the
same sense of urgency
to be competitive with
the banks that are local.
Many banks even as busy as they are today
can close as fast as 15 to 18 days.
Second, online banks don't
actually have local contacts here
you can chase.
If things don't go well,
you have someone to blame,
you can hunt them down in a sense.
The benefit with working
with somebody local
is that their reputation matters a lot.
It means a lot to me as a top Realtor
for future transactions,
but also for them to do a good job
so that they can get
future business with you.
They have much more on the
line with their credibility
than someone that doesn't have a focus
on a particular area.
Last but certainly not least,
it is the ability to actually
close the loan itself.
When you're in a contract,
remember you have 3%
earnest money down, or EMD.
This is your commitment amount
that you need to fulfill the
loan as part of the contract.
The reality is, no slight
interest rate improvement
is worth this massive risk.
I've personally seen
many of these loans claim
to have these amazing incredible rates
only to fall out of contracts weeks later
jeopardizing the entire deal
and the buyer's earnest money altogether.
It's absolutely not worth it for 0.1%
over a 15-year or 30-year term.
So now where is it a good option
to use these online banks?
Refinances are a great option
because you don't actually
have the time constraint
or the monetary risk
of breaking a contract.
You are welcome to shop around
and try out those teaser rates.
Worst comes to worst, the
refinance doesn't go through
so while you lose a lot of
time and have a headache,
at least you're not losing
tens of thousands of dollars
because of your commitment.
Just be wary of the fine print,
a lot of the banks itself
today can go very low
if you pay more money.
Think of interest rates
and your closing costs
as a sliding scale.
Anybody can go really low
if they're willing to pay
a higher closing cost.
Even look at the same teaser rate,
while the rate is at under 2%
the closing costs are at about 0.8 points
which is actually a lot of money here
in the Bay Area given the
loan sizes are much larger.
Something to be aware of and
also there's always a criteria
of how big the loan can be to begin with.
I hope this was helpful,
if you have any questions
or like to begin the home
buying journey, let's talk.
I'm never too busy to have
a private conversation
and share how I can help
you every step of the way.
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Engineering A Better Life Today.
