My daughter just did her mortgage online, and also received a lower rate. These days, almost all mortgage loans are resold by either the bank or the mortgage loan company. Go with the best rate.

Good question. Shows you are doing your research.
Here are some things to consider.
1) Mortgage brokers generally charge less for loans because they don’t have the overhead that banks must pay for. Also, they get their rates from several wholesalers, some of whom may be offering better rates than banks.
More than half the home loans in this country are now done by mortgage brokers.
2) However, when you are dealing with someone online, there is a matter of trust. Here’s something you might consider, go to mortgage brokers in your town with your request. Mortgage brokers generally have the same wholesalers so your local mortgage brokers should be able to match that rate, if it is legitimate. Try two to three different ones.
3) If you find a few who match that amount, get a Good Faith Estimate. That estimate will show you all the charges and fees. While a mortgage broker might offer you a great rate, you have to check to be sure he is not charging you a “hidden” fee.
4) After you get the estimate, ask the mortgage broker for references. Get names of local real estate agents, not just someone who could be his friends.
5) You can also go back to the bank and see if they will match the rate. Sometimes they will if they want the business. Don’t believe the rate is fixed, they have flexibility. Also, if you have a big account with them, let them know. Sometimes that will give you leverage.
6) As for the broker not getting a commission, that is questionable. Most brokers do get commission. Sometimes they get it from the wholesaler. But this sends a red flag up for me. I don’t care if they make a commission, I understand why they should. But don’t lie to me.
7) Will they bait and switch at closing time? That is a tough question. There is that risk. The more you have in writing, the better. You can also report the broker to the state licensing commission in your state. But if you go with a local broker with good references, you probably have less risk. Although even that person could pull a fast one. If they do, you always have the option of walking away. It would be a pain, but at least you won’t have to get stuck.
Good luck and I hope this helps. I think the more questions you ask and the more brokers you talk to, the better you will do. Just settling for the lowest “teaser” rate could be risky without doing any homework and talking to other brokers.

I disagree with Merry about going with the best rate.

Mortgages vary widely. There can be HUGE differences in closing costs, terms of the mortgage and pre-payment penalties. You can cost yourself thousands of dollars by only comparing rates and not looking at the entire package.

Another disadvantage of online lenders is that if you don’t carefully read their privacy policy, your information could be sold to other lenders, who each check your credit score. Each time your credit score is checked for a loan, you lose a few points. This can add up fast. And if problems start to arise, you are approaching closing and the loan has not been approved yet, how is this going to be handled? After closing, how fast will it fund? Online lenders tend to be more problematic in these areas.

Mortgage brokers typically have a wide array of programs available to them. Banks can be a bit more limited, but I think most are trying to get competitive in the marketplace.

Go to 3 lenders in your area with names you recognize. Get a truth-in-lending good faith estimate of closing costs and compare the terms. Are you going to have your interest rate jacked up because you are a week late on a payment? If you sell in 2 years are you going to be hit with a huge pre-payment penalty? These are questions you need to ask beyond rate.

they bait and switch all the time. 5.875% today is basically meaning the broker earns zero from selling the loan to his investor. so make sure your closing costs are also guaranteed, because charging you is the only way he’ll make any money.

Don’t believe everything you see with rates posted online. Even bankrate.com is a joke. most of the brokers advertising there do not offer loans at the rates they claim are available. it’s illegal, but they get away with it. bankrate has been sued by legitimate advertisers because of this. i quit advertising on there after seeing firsthand what other brokers were doing.