Mortgage Broker or Banker

Asked “Won’t I save money by going directly to the lender?” – here is what the “Mortgage Professor” Dr. Jack Guttentag (at Wharton) says,

“Probably not . In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiplelenders — in a typical case, 25 to 30, sometimes more — they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on.”

When lenders deal with brokers they give them a “wholesale” rate – what they offer to the consumer that walks through the door is “retail” rates. It’s the difference between buying stuff at Costco versus buying it at Walgreens. The broker does the markup depending on what they want to make on the loan and oftentimes brokers can beat the banks. The L.O. at the bank doesn’t have that option since they are already dealing with “retail” rates.

The scond point about regarding speciality products is key! If you’ve got perfect credit and income and employment and assets – well you’re probably better off going to the bank most of the time. But if you have any issue or something comes up in the mean time then you’re better off with a broker. Brokers can find a competitve program in such a situation and are more flexible with circumstances – often times they can beat the banks. Remember a bank is like the person that is willing to give you an umbrella on a sunny day!!

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