Over the years, there have been so many misconceptions about the merits of mortgage brokers, but it is worth reviewing again, especially as a number of forces are working to eliminate mortgage brokers on two fronts.
The first is a move by Congress to eliminate “non-bank financial institutions.” That certainly includes mortgage brokers. The second is that many major lenders have either eliminated or significantly cut back on their wholesale mortgage operations. Lenders representing two-thirds of mortgage originations either don’t do business with brokers or do few loans compared with what they did in the past.
Misconception number one: You can save money going directly to the bank. WRONG! In fact, loan origination costs are higher at the banks than at mortgage brokers. More important, most bank customers will do business with their bank regardless of the rate so there is little incentive for a bank to try to be “really competitive.”
A mortgage broker can shop a client’s loan among many lenders, not just for rate but as to whether they will actually do the loan or not. You might think that criteria are the same everywhere, but it’s just not true. Neither are processing time and other important measures of service that affect you.
Second, when you read about banks talking about improved earnings after rounds of cost cutting, how do you think they cut costs? Banks are highly cost conscious and they have dramatically reduced loan origination costs because the people in those jobs today make a lot less money than the ones they replaced. In part this is because borrowers aren’t sufficiently educated to be able to tell the difference between a good loan officer and a bad one. Why waste the money?
Finally, the motivation level of the average mortgage broker is significantly higher than that of the typical bank employee. The commission loan officer is more highly motivated to make sure your loan is approved. The bank loan officer likely gets paid the same regardless of whether your loan is approved or not.
Bottom line, a good mortgage broker can be a great asset to you, but you should shop carefully (and don’t ask about rates; the broker doesn’t set the rates). Instead, check for the quality of service by getting the names of a few of the broker’s recent clients and calling and talking with them. No honest broker will refuse you that.
Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.
Similar Posts:
- Mortgage Loan Market
- 7 Tips For Getting A Smart Mortgage
- How to put an end to all your problems with mortgage
- Refinancing When Rates Fall – Is It A Good Idea?
- 12 Steps to Make Bank Loan Approval Easy
