And close faster with fewer complications and better communication.
How do mortgage brokers save you money and why?
To confirm what most long time mortgage professionals are keenly aware of, a recent study on closed loans from 2018-2021 for the top 10 mortgage retailers and mortgage wholesale companies confirmed 30 year fixed rate mortgage savings of over $9k when using a mortgage broker.
On this loan type, lender fees on broker wholesale loans at closing were lower by nearly $2k less than bank and big retail lenders as well as interest rates on average being an eighth to a quarter percent less with a mortgage broker. This study was based on the Home Mortgage Disclosure Act (HMDA) statistics compiled via mandatory lender filings administered by the Consumer Financial Protection Bureau (CFPB) with United Wholesale Mortgage and Homepoint Mortgage compiling & reporting these findings.
Savings are even greater for a home buyer working with a mortgage broker on a government loan -- VA, FHA and USDA. Savings can be as much as $5k or more on lender fees for the same rate--or when matching the bank and big lender rate a mortgage broker can be a half percent or more lower on the rate. The reason why is the banks and big lenders have always considered government loans as a cash cow to increase their profit while a mortgage broker's gross profit margin is based on the loan amount -- never the loan type.
Why are mortgage brokers cheaper?
First thing to realize is the flow of money from Wall Street investor's MBS pools (mortgage backed securities) to main street America (the typical home buyer or refinance loan) has advanced over the decades to become extremely efficient through technology and industry changes.
This means the cost of wholesale funds mortgage brokers access for home loans is almost identical to what the banks and large lenders have. To make a profit, the spread or gross profit margin a broker needs to charge above their wholesale cost of money --compared to a bank or direct lender (think BofA, Wells Fargo, Rocket or Loan Depot as examples) is directly related to overhead. Huge overhead expenses means a bank or a big lender needs to charge more than a mortgage broker on every loan to make a profit.
Mortgage brokers typically operate efficiently with very low overhead, and with minimal advertising budgets and no large corporate salaries to pay. Most mortgage brokers don't require big lender style multi level management and have ownership and leadership also doubling as loan originators --thus reducing expenses. Mortgage brokers obtain most of their loans via referrals from local real estate agents, other professionals, and happy past clients and don't need the bank & big lender's massive, very expensive advertising budgets to attract an ongoing stream of new business.
Mortgage brokers get loans closed faster
Banks and big lenders operate on a big factory assembly line system while most mortgage brokers offer a one to one personalized experience. In other words, with banks and big lenders, lots of different people at different stages are involved in getting a home loan to closing. Most banks and large lenders will have as many as a half dozen --or more -- different people a home buyer or refinancer may interact and communicate with. With that many people involved, a borrower's personal situation and documents get convoluted, things get missed and conversations are often repeated --sometimes it seems endlessly.
Remember, the more people involved -the more likely communication suffers and something gets missed--and a big lender's system is only as good as the weakest person in that 6+ people assembly line. Thus the dissatisfaction most borrowers have with the bank or big lender mortgage experience.
Mortgage brokers - who are experienced and good communicators of course -- provide that one to one personal home buyer experience --one that the bank and big lender assembly line process just can't match.
You'll be convinced
Once you work with an experienced mortgage broker who takes the time to explain the entire process and answer all your questions thoroughly, I'm pretty confident you'll be convinced a mortgage broker is the best choice for your next home loan.