What are the risks associated with refinancing home loan with a local lender instead of the big companies?

It sounds like the other person just copied and pasted some random information from a website.

Hon there is not a risk; they all get their money from the Federal Reserve. What you will be dealing with is professionalism, turn around time, and fees. If you go with a smaller ma & pop shop, such as a broker or a Broker Banker, or a independant bank you are using the middleman. The Bigger banks pay these brokers a fee called a Yield Spread Premium, or YSP, to submit their loans to them. The brokers generate the application; collect the required documents outlined by the underwriter, and charge you their fees for doing so. The time in which it takes to complete the loan application depends on the speed of the broker and you to get to them what they ask for, and the volume the bank is dealing with at the time your information is submitted to them. With the broker, you are more likely to receive a higher level of “personal” attention then you would if you went with a bigger company such as WaMu, Wells, or BOA. The broker will shop around for you and determine the best loan program and interest rate based on your income, credit score, and loan amount, in addition to other determing information. Therefore, your chances are better for achieving what you are looking to accomplish with your refinance.

With the broker, you are an individual, a person if you will. With the bigger banks, you are just a loan number. It could take the bigger bank several weeks to months to complete the loan process in order to get you to the closing table. That is a risk in itself I guess. How long do you have to accomplish your refinance? If you are pressed for time due to an urgent payment of a debt, you may want to go the broker route. The brokers usually know right away which lender to send the loan to in order to speed up the process. They have worked with their banks fo choice in most cases for years and are familiar with the individuals there who they can count on to make things happen quickly. Either way the period is undetermined and relies on the factors listed above.

If you decide to go directly with a big bank, you would be only given what they have to offer. They are not going to shop around for you to find a different deal with another bank that may benefit you. If you don’t take their deal and walk away, you will have to start all over with another bank. However, if you cut out the broker and go directly with a loan officer at the bigger bank, you will not pay the additional fees the broker would charge on top of the banks regulated fees. Therefore, you will be saving some money doing it that way when it comes to your final closing costs. If you are, doing a Cash Out Refi that could make a huge difference in your proceeds amount.

I have been a Residential Mortgage Closer for 7 years and have worked for a Brokerage Firm and 2 banks, Washington Mutual and GreenPoint Mortgage. There are benefits of doing it either way. It is all in what your expectations are and what you want to accomplish. Are you looking for a lower rate? Cash out? Borrowing against your equity to pay off debts?

What ever you decide to do is up to you. You will not need to worry about risk since it all ends up in the same place in the end. The servicing rights of your loan may be sold several times and the interest rate on your note will be sold as soon as possible to Fannie Mae in the secondary market.

Good Luck!