Why Mortgage Brokers Beat banks & big lenders

Why Mortgage Brokers Can Offer Lower Rates

When shopping for a mortgage, one of the biggest misconceptions is that a big bank or national mortgage company must have the lowest rates because of its size.

That is often not the case.

Mortgage brokers shop wholesale lenders and can compare competing loan options instead of being limited to one company's pricing. That competition can translate into lower rates, lower lender fees, or a better overall loan price.

What to Know

1. Mortgage Brokers Can Shop Multiple Wholesale Lenders for Better Pricing

This is one of the biggest advantages of working with a mortgage broker.

A mortgage broker isn't limited to one lender's rate sheet. Brokers can have access to multiple wholesale mortgage lenders competing for their business.

That means your broker can compare rates, lender fees, loan programs, underwriting requirements, and overall pricing among different lenders.

If Lender A isn't competitive today, the broker may be able to use Lender B, C, or D instead.

Competition matters.

Rather than hoping one lender happens to have competitive pricing, a mortgage broker can shop among multiple lenders looking for a better loan price.

2. Bigger Doesn't automatically mean cheaper

Consumers sometimes assume a giant lender must have lower rates because it originates so many loans.  But size doesn't automatically equal lower pricing.

Large mortgage companies can have substantial expenses, including:

• National advertising campaigns
• Large corporate and management structures
• Call centers and sales teams
• Technology platforms
• Compliance and administrative departments
• Expensive customer-acquisition programs

Those expenses have to be paid somehow.  Mortgage lending is a business, and the revenue generated from each closed loan helps cover those expenses and produce a profit.

That's why you shouldn't assume the company you see advertised everywhere is automatically offering you the lowest-cost mortgage.

3. Big-Lender Advertising and Overhead Can Be Reflected in Their Pricing

Think of big national lenders like Rocket, NewDay, Loan Depot and Cross Country. Their television commercials, online advertisements, stadium naming rights, branch offices, call centers, corporate executives, and large sales organizations cost money.

Those expenses don't disappear simply because a company originates a large number of mortgages.

Mortgage brokers often operate with a leaner business model and access wholesale lenders that don't need to maintain the same expensive consumer-facing infrastructure, resulting in a cheaper cost to the loan for a mortgage broker--and a lower rate for you!

That's one reason you should never assume that a big-name lender means a lower mortgage rate.

Compare the actual numbers.

5. A Low Advertised Rate Doesn't Necessarily Mean a Low-Priced Loan

This is where the rate quote game really gets interesting.

A lender advertises an incredibly low mortgage rate.  You call.

Then you discover that the advertised rate may require discount points, substantial lender fees, a specific credit score, a particular down payment, a certain loan amount, or other favorable assumptions.

That eye-catching rate may be real under the advertised assumptions—but that doesn't mean it's the best-priced loan for you.

Always ask:

What is the rate and how much does that rate cost?

A lower rate with thousands of dollars in additional points isn't automatically a better deal.

Shop the loan price, not just the rate.

6. Mortgage Brokers Can Compare Lenders and Move Your Loan to the Better-Priced Option

Wholesale lenders compete for mortgage broker business.

That's powerful.

If one wholesale lender raises its pricing, another lender may be more competitive.

Mortgage brokers can compare available lenders based on factors such as:

• Interest rate
• Discount points
• Lender credits
• Loan program
• Mortgage insurance
• Underwriting guidelines
• Turn times
• Property type
• Borrower qualifications

Instead of being locked into one lender's pricing, a broker can look for the lender that makes sense for that particular borrower and loan.

That's competition working for you.

7. Experienced Mortgage Brokers Combine Competitive Pricing With Personalized Service

Price matters—but getting the loan closed matters too.

A great mortgage rate isn't worth much if the lender can't successfully navigate the loan through underwriting and closing.

An experienced mortgage broker can evaluate your complete situation before deciding where to place the loan.

Income, assets, credit, debt ratios, property characteristics, appraisal issues, loan guidelines, and underwriting requirements can all affect which lender is the right choice.

Instead of dealing primarily with a national call center or repeatedly explaining your situation to different people, you can work directly with a mortgage professional who knows your loan.

The goal is straightforward:

• Competitive wholesale pricing.
• Experienced guidance.
• Personal service.
• And a smooth closing.

8. Before Accepting a Bank or Big-Lender Quote, Get a Mortgage Broker's Second Opinion

Already have a quote from a bank, online lender, builder's lender, credit union, or big national mortgage company?

Great.

Don't automatically accept it.

Let a mortgage broker compare it.

Look at the same interest rate, discount points, lender fees, loan program, and lock period side by side.

You may discover that the lender with the biggest advertising budget doesn't have the best mortgage deal.

Even a relatively small improvement in rate or loan costs can potentially save you thousands of dollars.

The Bottom Line

Big banks and national mortgage companies have one major limitation:

They sell their own mortgage products and pricing.

Mortgage brokers can shop among multiple wholesale lenders competing for their business.

That competition can mean lower rates, lower costs, or a better overall loan price for the borrower.

So before automatically choosing the bank you've used for years or the mortgage company you see advertised everywhere, compare its offer with a mortgage broker.

Mortgage brokers can have lower rates than banks and big lenders.

And remember:

Shop the loan price, not just the rate.