See below.[quote=McNabbs]Thank you all for your advice.
But I still don’t understand how can a broker possibly give a better rate than a bank?
[/quote]
They can’t per se. However, they can shop the banks they work with in a way that you can’t do yourself. It may be that some banks have slightly lower rates or have standards that are better for your situation.
[quote=McNabbs]
Can’t I just walk into the same bank and get the same loan without paying any YSP?
[/quote] Yes. However you would be shopping in a smaller market (usually with only one vendor). Further, you don’t pay the YSP yourself. That gets paid by the bank. Sometimes there is a 1 to 1 relationship (eg: a 5% rate with no YSP vs. 6% with 1% to LO) however the relationship is often not that simple (eg: 4.75% at par vs. 5% with a point on the back to the LO). This way, it is sometimes a better option for people whose funds are tight as they approach closing (in the last example this would have essentially eliminated the need for an origination fee). And banks generally charge some version of an origination fee (or charge you the equivalent amount some other way). I am not saying that banks are worse per se, just that they are no better as a general category.
From a cost perspective:
-interest rate is more relevant than yield spread,
-total lending cost (the approximate nominal APR) is more important than interest rate,
-and cost structure (the feasibility of one-time costs vs. recurring expenses) is usually the most important[quote=McNabbs]
Or is it that the broker provides other services not available in banks?[/quote]
Since brokers usually have no allegiance to a particular bank they have no interest in towing the company line. However, the real issue is competence and the right fit. Many LO’s (both bank employees and brokers) suck and many are very good. Experience and reputation both matter. The skill sets are pretty diverse.
Don’t take my word for this.
Go talk to bank people and well-recommended brokers and find someone that can give you realistic estimates and who can answer your questions.
