Mortgage Professionals ... Pros & Cons of Recommending a Mortgage Broker vs. A Bank?

Question

I am a Realtor. To aid me in providing better service to my clients. What are the pros and cons of suggesting a Mortgage
Broker (who will "shop" various Lenders for a particular Buyer) vs suggesting (say) Bank of America ... or any entity that lends their own money.

Answer 1

If you want to give the best possible service to your clientele you should be suggesting that they shop for the best loan and terms for their situation. No single source -- lender or broker -- will always be the best fit for all clients. Anyone who says otherwise has an ulterior motive, usually not to the benefit of the borrower.

Answer 2

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.

Answer 3

Your best bet is going to be with a broker or a mortgage banker. The mortgage bankers, have all of the flexbility of choosing lenders that brokers do but lend their own money. Therefore they will have lower rates then brokers and have access to the same lenders and guidelines. They control the whole loan process and do the closing documents, brokers have to wait for the lender to prepare the closing docs from the lenders.

Answer 4

The biggest issue with a branch bank is that they are not too flexible on what they do. If your client does not fit their loan profile, no deal. With a broker, they can evaluate the clients needs, and find a program that works for them, and often at a better rate. I had a friend who had a mortgage at SunTrust for 14 years, never paid late, and had a good credit rating. Got a quote on refinance from Sun, then I took them to suntrust for 1.250 lower rate. Sometimes wholesale side can do things retail cannot do.. in fact that is OFTEN the case. And I did make some money on the deal, and still saved them a ton of money.

Answer 5

It's better to go with a Broker. We are a Broker and a Lender. We work with almost 200 other banks and lenders

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