mortgage broker, or retail bank?

Question

ok why do people fear Mortgage brokers and feel better going to a retail bank to get their mortgage rates? I mean Banks hide their fees in the rate and are more strict in their guidelines. Mortgage brokers have to charge 3rd party fees within the loan aside from the point or two they have to charge for a broker fee. So I need the imput of a proffesional to rebuttal that objection, to le the client know that at the brokers cost they are getting smething they couldnt otherwise get walking to a bank.

Well so far what youve been telling me I know. I need a good way to rebuttal that objection with the fees. The one I used is that we have more competitive rated than the bank. Can retail banks buy he rate down?

Answer 1

I am a mortgage broker, and used to work for a retail office. I see now that going with a mortgage broker is better. The reason for that one we charge less in closing costs, yes we have to charge a third party fee but we do not charge all of those origination and discount fees that a retail branch would. They have a lot of over head to pay for and most give a salary to their employees. Second, we get discount wholesale rates from all the lenders we work with and retail is just retail... The best way to explain it is like if you were to go shopping for the same grocery product, retail is like a chain store you can find in every town in your area, brokers like me are like a B.J.'s Sam's Club, or a Coscos.

Answer 2

I've been a broker for many years now. My first job was through a retail bank, and it sucked. Rates were way higher than everyone else.

When people ask me that question, that's the perfect time for you to project your complete confidence that you are the one who will get them their best deal. That doesn't necessarily mean the lowest rate or cheapest closing costs, though of course you are very competitive. Your job is to have a real conversation with your client about their needs today, 3 years from now, 5, 7, 15 years from now. And plan their financing accordingly.

Most retail bank loan officers know two products to sell. Here's your 30 year fixed and your 5 year ARM. Take your pick. Whoopdeedoo.

The theory behind brokering loans is that you have far less overhead than a retail bank, as it's unlikely you own the largest building in town like the banks do. Ultimately, all the money comes from the same place, and you have access to the exact same dollars that a retail bank does. But, because you can choose to work with 10-50 different banks, you can look day to day, hour to hour, and pick the one who has the best price for your loan product. Ask your client how many banks they are willing to check on daily to make sure they are getting the best deal. They will answer you with none. That's why they hire you, and that's part of what they pay for. To shop 50 banks for them.

People also mistakenly assume that by going to a retail bank, they couldn't possibly be taken advantage of as badly as a broker could, under the premise that the bank would have stricter policies.

The worst screw jobs I have ever seen in 10 years in this industry were all done by retail loan officers at banks and finance companies. I mean these guys just hosed their clients beyond comprehension. And their bank were thrilled to take their money.

Bottom line, it's all about getting the client to put their confidence in you. That can be done no matter where you work, it's all up to you.

Answer 3

You're totally right. First off, a broker can get exactly the same programs that a bank can get, but they have access to lower rates. For example, I know that Eagle Mortgage charges it's own clientel higher rates than they make available to their brokers, so the brokers can offer their clients the exact same product at a cheaper rate. People think of brokers as shady, and sadly that's not entirely inaccurate, I've seen them do some crazy, sometimes illegal, stuff. BUT there are some really good ones out there, and they have access to products that banks wouldn't touch with a ten foot pole. People think banks are more ethical, elite, and direct. What they fail to realize is that banks banded together as a large, powerful force to get themselves exempted from the ethical standards that brokers are held up to. Banks do not have to disclose yeild spread premium which I think is totally wrong, their loan officers are exempt from licensing, and they have the resources to smokescreen the shady stuff they do. I have always used brokers and I always will. I have worked in both wholesale and retail, brokering and inhouse, and I have to say, I have found brokers to be by and large hard working, empathetic people who do a lot of research and spend a lot of their own money doing right by their clients. Banks figure they have so much business coming in that they need not worry themselves about the one that got away, there will always be another client banging on the door to replace them.

Answer 4

A mortgage broker can provide you with more options when shopping for the best possible loan. A broker utilizes several lender programs in order to fit the needs of each individual borrower.

You may say to yourself, "Why not just go to my bank?". Well, if you did, you would find that large retailers are very limited to the rates and programs they can offer. They may take much longer to process your loan. Then, if your loan is declined, you must start all over again with another lender and another application.

Advantages of the Mortgage Broker
A mortgage broker is a company or individual that works closely with wholesale mortgage lenders to provide customers like you with a wide selection of mortgages. The mortgage broker originates the loan while the mortgage lender funds the loan. One of the best advantages of using a mortgage broker is that they have access to a wide variety of loans and competitive rates. Additionally, mortgage brokers tend to be highly specialized, dealing primarily with mortgage loans. Finally, many mortgage brokers are highly motivated to quickly and effortlessly get you an approved individualized loan.


Local Bank Lender
A local bank, on the other hand, may not have your best interest in mind when originating a new home loan. Why? Well, most banks don't have access to a large variety of loans and rates. You may end up paying more for the exact same type of loan. Also, banks deal with all types of loans and thus don't have the specialization that a mortgage broker might have. This includes less time available to prepare loans, stricter underwriting standards, and less personalization.


Also, using a Mortgage Broker, they have access to many many other lenders ( I underwrite for 150 companies) and only have to pull credit one time, and they go off my credit. Becareful having many different ones pull "their" credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) FHA/VA approved too. If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home &/or refinancing, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


So in a nut shell, Bank Loan Officers = The loan officers at a bank, credit union or other lending institution are employees who work to sell and process mortgages and other loans originated by their employer. They often have a wide variety of loans types to draw from, but all loans originate from one lending institution

Answer 5

You answered your own question. People generally "feel better" going to a bank to get their mortgage rates because they often fear mortgage brokers. Also, loan officers spell better than brokers...couldn't resist!

Insurance Biz wrote:
(1)"Bank guidelines are very structured...but if they don't meet the criteria established by the bank, they could be forced to start over at another institution."

FALSE: Today most banks follow Fannie Mae's underwriting guidelines which creates uniformity among banks underwriting guidelines. And guess what - this includes wholesale bank divisions which the mortgage brokers use.

(2) "As a mortgage broker, you have access to many different products from many different lenders and can take the borrower to the lender that is going to give them the best product at the best price for their situation."

FALSE: I love when brokers say "we have access to hundreds of lenders to get you the best rate." Answer me this - how many of those lenders do you actually use? Maybe 5 to 10.

Also, mortgage brokers aren't just looking for the best rate for their borrowers - they are looking for a combination of the best rate AND Yield Spread Premium paid by the wholesale lender.


Tiny Dog wrote:

(1) "[A] broker can get exactly the same programs that a bank can get, but they have access to lower rates. For example, I know that Eagle Mortgage charges it's own clientel higher rates than they make available to their brokers, so the brokers can offer their clients the exact same product at a cheaper rate."

MISLEADING: You are SOOO bending the truth!! Yes, it's true that retail banks charge a higher rate to the public than what the same banks will offer to a mortgage broker, but what you FAIL to mention is that the broker mark's up this wholesale rate to match the retail rate AND this is the rate offered to the public.

(2) "People think of brokers as shady..."

Agreed, as demonstrated in point 1.

(3) "What they fail to realize is that banks banded together as a large, powerful force to get themselves exempted from the ethical standards that brokers are held up to. "

MISLEADING: C'mon, I worked at a bank and I would have been shown the door if I was doing anything unethical.

And if you rebut with "oh, you're an agent and charging 6% commission is a ripoff", then you are missing my point. I DO NOT CARE the amount that you charge, what I do care about is the lack of transparency and bait n' switch mentality that runs rampant in the mortgage brokerage business. Contrary to what you believe, it's true.

Answer 6

Ask this question:

Do they have perfect credit? Do they have 20% down?

Bank guidelines are very structured, and yes, they do have several different programs, but if they don't meet the criteria established by the bank, they could be forced to start over at another institution.

As a mortgage broker, you have access to many different products from many different lenders and can take the borrower to the lender that is going to give them the best product at the best price for their situation. Making a change if one lender is a problem can be seemless with a broker, also.

Yes, mortgage brokers get paid well, but if they work hard for the borrowers, they will earn a reputation that will make them very successful. Sell yourself first. Be genuine in wanting to help the borrower get the financing they need.

Answer 7

I used a mortgage broker for our refinance last month. I have no fear, but I was referred to this guy buy a very good friend who is a real estate agent and has used him several times.
I did check with Wells Fargo on the loan as well, but they couldn't get as good of an interest rate as what we got with the broker.
I suppose if people don't get referred or don't know a broker, they are going to go to their bank as they know and trust them.

Answer 8

Having been a mortgage broker and bank loan ofcr... Well,,,, I gotta tell ya go through your bank... Mortgage brokers have way more fees and they trump your charges... How do you think they get paid so well...?? as a mortgage broker in the past--say on a 75k mortgage, my bonus was way over 5k... That was just on one loan... I know as a mortage loan ofcr at the bank, I made no comission...
Unless you have a personal friend as a broker,, I'd say steer clear. But if your credit is not up to par--then you may have no choice but to go through the broker.

Answer 9

Here's how it is.... Banks have lower closing costs (because they can absorb some of the third-party costs) but have higher rates (because they only have their rates to use). Brokers have higher closing costs (because they're required to use third-party services) but have lower rates (because they have hundreds of bank rates to choose from).

Who you choose... all depends on the Term of the loan you're getting. If it's a short term loan (1yr to 10yrs), go with a deal that has the lowest closing costs (Because you'll never get the "savings" out of a low rate). If it's a 30yr. loan, then go with the deal that has the lowest rate (the monthly savings will add up over time to exceed the higher closing costs).

Or, find a Broker with his own licensing. He'll be able to beat any deal, Apples for Apples.

Answer 10

Hi skyth, Because Brokers have access to literally hundreds of wholesale lenders who all would like to have your business. A Broker will shop your loan to many lenders and find the one that has the beat deal for you. I hope this has helped. Good Luck, ~Trey