Almost all lenders fit into 1 of 3 categories:
- Banks/Credit unions
- Mortgage Bankers
- Mortgage Brokers
All three of the above lenders offer the same products which consist of: Conventional, VA, FHA, USDA home loans. Most of these loans are underwritten, closed and sold on the secondary market in all 3 environments.
- Banks/Credit Unions- They typically have their own money to lend and their own money only. The have the highest overhead of the 3 and it typically reflects in their rates/costs. Every now and then they will run a promotion and be competitive, but typically they are the least competitive of the 3. Home loans are not necessarily their number one priority. For this reason they are typically the slowest of the three.
- Mortgage Bankers- Bankers typically underwrite their own loans and have 4-5 sources that they regularly sell them too. They are much faster than bankers and can be faster than brokers at times. In fact the main advantage of a mortgage banker is speed. They are typically 3-5 days faster to closing than brokers, and 10 days faster on average than banks. There are 2 main disadvantages to this environment.
- The first- They employ a highly paid staff of underwriters and funders. They are not as big as banks, so the cost of these salaries gets passed onto the borrower.
- The Second- The are conservative. If they close a loan that cannot be purchase on the secondary market it really hurts their lending power. So for this reason they can get on conservative overload.
- Mortgage Brokers- Mortgage brokers are bar none the best lending environment for most borrowers. Brokers have the ability to use any bank in which they have a relationship with. Currently we have 41 of them. This allows us to cherry pick the lenders with the best rates, lowest cost and best service. Neither a bank nor a banker have the ability to do this. This simple strategy allows my clients to benefit from the most competitive rates at the lowest cost with great service.
I have worked in all three capacities at one point or another in my 15 year home loan career and I can honestly say that brokers consistently give the client a better deal than any other lending environment. It just isn’t possible for the other 2 to match the rate and costs of a broker.
“I love it when a plan comes together” – Hannibal Smih, A-Team
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