“Used to be,” it was easy to get a mortgage. Provide minimal doc­umentation and you could get an 80% LTV first mortgage. “Used to be,” you could finance 100% of your purchase with a first mortgage and a “pig­gyback” second mortgage. “Used to be,” if you couldn’t verify your income, you could get a stated income loan that didn’t require verification. “Used to be,” you could go to a mortgage broker and he had access to products offered by tradition­al banks, sometimes at better rates than those offered directly from the bank.

The world has changed. As a result of the recession, caused in large part by the mortgage crisis during the last decade, new regulations have significantly changed the mortgage process. As a result of these changes, large banks have become more se­lective with the loans they finance and of­tentimes pass on certain loans considered riskier, while offering better rates to bank customers.

As a consumer, you should consider how to shop for your next mortgage. As al­ways it makes sense to get more than one opinion. Your realtor or attorney may have their preferred lender who can get the loan closed, but it is up to you to make sure you get the best rate and other terms. Consid­ering your mortgage is likely the most im­portant financial decision you will make, spend a little time and do the due dili­gence. To paraphrase the commercial, 15 minutes could save you hundreds of thou­sands of dollars.

Jumbo Loans

“Used to be” conforming (loans up to $417,000), had rates that were lower than jumbos. Traditionally, an originator would encourage the borrower to reduce the loan to $417,000 if possible. Today, jumbo rates are typically a quarter point or more low­er than conforming loans. Some banks of­fer more flexibility and additional features on these portfolio loans (i.e., Citibank of­fers the rate protection program which, for three years, reduces the rate if rates drop). In addition, the large banks want new re­lationships and are willing to offer special promotions on purchase loans, both jum­bo and conforming.

Deposit Relationships

Most large banks offer special bene­fits to bank customers. Wells Fargo of­fers a rate reduction if the borrower sets up an auto deduction to pay the mortgage from a Wells checking account. Chase has a cashback promotion which pays the bor­rower 1% of the amount they spend on their mortgage payment, up to $500 an­nually. Citibank offers the Offset Mort­gage program which allows the borrower to receive a credit based on the amount in their savings account. This program could save the borrower hundreds of dollars per month in addition to lowering the rate to the lower jumbo rate. Another program, called Citigold, provides the borrower with a large deposit relationship to have a savings of up to 3/8% off the rate.

The significance of these types of prod­ucts from traditional banks is that the pric­ing is typically only available through the bank directly. Even when mortgage lend­ers sell their loans to these banks, they may not be able to offer some of these products or pricing benefits. Be sure to call a bank for a quote.

Construction Loans

Major banks, in most cases, don’t of­fer construction loans. If you’re knocking down a home or looking for funding to do major renovation, you likely will need a lender who specializes in this or a local commercial bank. Typically, the construc­tion loan will provide funding as you build and, after the construction is complet­ed, the loan will be refinanced with a tra­ditional mortgage. Rates for construction loans are higher than traditional loans.

Renovation loans

If you purchase a home that needs some work, and the appraisal states that this work is needed to make the house hab­itable, you may not be able to get a loan from a traditional bank. You will need to re­quest a renovation loan. While some banks may offer such a loan, this likely is a prod­uct you will be obtaining from a mortgage lender.

No income loans

While large banks will probably not consider a loan where the buyer cannot verify sufficient income to qualify for the mortgage, there may be some smaller banks or mortgage lenders who can provide such loans. This is again an area where a borrow­er should be reaching out to non-tradition­al lenders who can offer such products.

Community loans

While most lenders can offer FHA loans which provide for low down payment op­tions (3½% down) these loans can be ex­pensive. If the borrower meets eligibility re­quirements for certain “community lending programs” offered by banks, the terms could be significantly better. Banks have require­ments to invest in the community and many have proprietary products that meet these needs. A borrower is eligible if they either earn less than 80% of the median income in their county or they live in a low/moderate census tract. If you think you might satisfy one of these criteria, it is worthwhile to ex­plore this possibility with your bank.

Just because it “used to be” different doesn’t mean it used to be better. Do your homework, get several options, and be sure to approach the institution that is the best fit for your situation. As a general rule, at the present time, you will probably be bet­ter served at a large bank if you are shop­ping for a plain vanilla jumbo or conform­ing purchase loan and at a mortgage lender if your application has various challenges. Of course, no general rule is absolute and each instance can have its own unique out­come. However, remember that while the above may apply today, in a month, it’s pos­sible that today’s general rule will be to­morrows “used to be.”

David Siegel is a Home Lending Special­ist with Citibank in its Englewood office. Siegel can be reached at david.siegel@citi. com or 201-419-1330.

By David Siegel