What is the difference between a mortgage broker and a mortgage banker? What are you? Are you a banker or are you a broker that is the question.
In this episode of the mortgage brothers podcast we discuss the pros and cons of going with a mortgage banker vs a mortgage broker for your next home purchase or refinance. Watch the video above for all the details. Below are the highlights.
If you’re shopping for a home, or you’re refinancing your current mortgage. You may come across this question; do you choose a mortgage broker or a banker? Now depending upon who writes the article, they’ll tell you just, just how, how great they are. We aren’t going to do that in this podcast episode. We are going to break down all the differences, the pros, and the cons, of going with a mortgage broker vs a banker. So, let’s dive in and cover first; what is a banker, and what is a broker?
First, a banker is someone who is an employee of the bank that sells the banks products. They are selling programs that are backed by the banks money. So when the loan is given to the borrower, that money is coming from the bank.
Second, a broker has a relationship with wholesale banks. So what we do is we sell the mortgage products of wholesale banks and we have a lot of relationships and investors that we can fit our clients within. Think of it like buying something retail vs. buying something wholesale.
Okay so now that we have defined the 2 options – let’s discuss the pros and cons. Starting with with banker, because yes banks can be great for certain reasons. We will often recommend a bank to someone who wants the least amount of paperwork and prefers to sign documents primarily in person. If you prefer not to do DocuSign or any type of e-signatures, you just want to walk into the bank and sign everything right there at the bank. If you just want the least amount of technology, phone involvement, computer involvement, then a bank can be an ok option for you.
Second, if you are self employed or have multiple business accounts, savings, checking, etc. with your bank then you may want to explore what they can do for you. This is all predicated on your relationship, so if you have a relationship with your banker then chances are they are engrained into your specific scenario and may be able to navigate your deal a little easier.
Now let’s talk about the mortgage brokers, which is what we at the mortgage brothers are. We want to start by saying this; we are mortgage brokers for a reason, we would be a banker if it were better to be a banker. That said, let’s focus on the reasons of why going with a broker makes so much sense.
First, as we mentioned, we get our money from wholesale lenders and these lenders are constantly competing for the brokers business. So we get to take your specific scenario and shop it around to a multitude of banks to see where we can find the best deal for you. This is unlike a bank as we mentioned who are only able to sell you their specific in house products.
Second, let’s look at service. Again, think of the differences here as the difference between retail and wholesale. Because we have relationship with wholesale lenders they are in business to serve us (which in turn is you because we are on the same team). We typically have dedicated account managers with these lenders whose sole focus is to provide excellent service to make the transaction smooth, fast, and generate repeat business. Because lenders are competing with one another you receive the benefit of the best performing ones. You have a whole team keeping you happy. And if someone is not stacking up to their fullest potential, we’re not doing business with them again.
A client of ours was recently furloughed. Here is the scenario; he was furloughed for six months, and then was put back to work. Because they were out of work for six months, most banks immediately just won’t touch that loan. Even if they would, they’ll have certain requirements that make it unfeasible. So, they can’t go to their bank. For us, we can take that scenario – and send it to 12 different banks. Maybe five of them, or maybe eight of them will say no, but we can find a couple that will absolutely say yes. So not only does the competition and alternative lender options help with service it also helps with handling specific deal scenarios.
Lastly, let’s talk about pricing. I mean, one of the biggest benefits of mortgage brokers over mortgage bankers is our ability to shop pricing. Often times I think this is one of the biggest broker myths. Often times we get first time clients that think we are middle men, and because of that reason, pricing cannot possibly be better than banks. Certainly a valid question and understandable that this myth is out there. However, this is false, I’ll explain. Because we get a wholesale price from lenders – these are prices that are not available to mortgage shoppings when going retail. Again think of this like any consumer product good. You are able to access prices for mortgage products at wholesale, not retail. So you automatically off the top will have better pricing. Second, like many brokerage shops, we are local and small in comparison to large national or regional banks. We don’t have all the bloated overhead costs of marketing, staff, and other things that force us to pass those costs on to our clients. We don’t do Super Bowl commercials, or spend exorbitant amounts of money on big fancy office buildings or swag.
As with most of our podcasts, the best way to get all the details is to watch the video above. We go even more in depth on the pros and cons, and specific examples of some of the points above, as well as a few additional ones you need to know. So, be sure to check it out!
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Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.BACK TO LIST