How many of you use a mortgage broker and how many of you deal with lenders directly? I know most brokers say they have relationships with tons of lenders when they usually only deal with a few on a regular basis. It seems you wouldn’t need a broker if you found a few good lenders. Do lenders give brokers “special rates”? What’s your take?
From the Broker perspective:
I know most brokers say they have relationships with tons of lenders when they usually only deal with a few on a regular basis. I
In most circumstances, although the numbers have changed drastically with the subprime fallout, some brokers do have access to “hundreds” of lenders. Each Lender tends to have their own niche market. Some are better at stated, some better at multi-units, etc. A good broker has many Lenders in their arsenal so that they may find a product that best suits their clients needs. Some smaller companys force you into the few programs that they offer.
It seems you wouldn't need a broker if you found a few good lenders.
In most cases, these Lenders do not have store front where the retail customer can work with them. They use Licensed brokers as their storefronts and eliminate the overhead costs.
Do lenders give brokers "special rates"?
Due to the decreased overhead, lenders offer better rates to their authorized brokers which in turn can be passed on to the client. A good broker should do all of the work for you. With the exception of gathering the necessary documentation and being available for inspections, appraisals, etc., the broker should handle everything else. besides the better rate, that is what they are getting paid to do.
Your question is the core argument between the retail and wholesale distribution models.
There is good reason why statistics indicate that mortgage brokers orginate between 60-65% of all loans in North America—the wholesale model delivers a lower cost of borrowing/better value proposition then its retail counterpart…
Brokers have access to alot of programs that you flat out will not get at a local bank. Any sort of issues with regards to documenting income you should probably route to a mtg. broker. It is harder now, but there are still lenders out there. I’m not sure if the bill that Congress passed concerning yield spread has went into affect yet, but if you’re going to deal w/ a broker you should educate yourself on this just so you get a better picture of how it all works.
I like working with local banks. Nothing beats sitting at the loan officer’s desk and looking him right in the eye if a problem needs to be fixed. It sure beats talking to some minimum wage slug on the telephone who doesn’t have a clue what is going on and doesn’t have the power to fix any problems.
I’ve got a good honest mortgage broker for any loans that are unusual in any way.
There are a lot of mortgage brokers who are bordering on being crooks. Take everything you’ve ever heard about used car salesmen, and it all applies to mortgage brokers.
If you are going to use a broker, shop carefully, and if you find a good one, stick with him and develop a solid relationship.
Please do not group all mortgage brokers or bankers together when you make derogatory statements like that. There are plenty of good honest people in every profession. I’m sure that you have heard plenty of stories about real estate investors that would sell their mother to make an extra dime on a deal, but that does not make you all scumbags. Also, when going with your “local bank” you are getting access to about five programs and shorter amortization periods. I’m sure your “local bank” is just the neighborhood branch of Wells Fargo and your personal banker probably could not pick you out of a line up.
its 50/50 - there are some great mortgage brokers out there and some who are the lowest scum.
They do have a lot of programs you could go find on your own. They can also pull your credit once and shop 100 banks where on your own if you go to 100 banks chance are you will have your credit pulled 100 times
when things were good - i had a broker tell me he could broker a loan for you through wells fargo and charge less then wells fargo would if you went to them direct
I appreciate the replies so far. If brokers really do get “special rates” then it would probably pay off to work with a good broker on a regular basis. I do not use local banks. They just aren’t going to be competitive enough. You gotta trade a little bit of personal service for better terms.
My wife is an SBA underwriter. She says that alot of the time outside brokers just complicate the deal and sometimes keep the loan from happening. She claims they tend to be rude and condescending. I am certainly not saying that all brokers are this way, but I’m also not calling my wife a liar. I guess I’m just looking for some insight from other brokers and investors on the subject. In fact, most of the responses to my question have been from brokers that appear to be very professional.
By the way, my question was initially in the commercial forum. I was referring to commercial loans. This may or may not change things…
Speaking as the owner of a commercial (and residential) brokerage, the SBA program really is NOT set up for broker participation. That might explain your wife’s experience. I know few commercial brokers who will originate an SBA loan. Personally, I only originate them if they are larger loan amounts and have lots of moving parts. That justifies my fee. Otherwise, I just refer them to one of my favorite SBA lenders. (Unlike traditional commercial loans, I cannot get wholesale pricing on an SBA loan. If I charge a fee - and I don’t like to work for free - it makes the loan look more expensive.)
As for residential brokers, I think my peers have defended the profession very well. I would add that I have read 2 studies that indicate brokers generally offer better service and better pricing than bankers. That might explain the greater market share. It also might explain why the battle in Washington D.C. has more to do with lobbying strength than it has to do with protecting the consumer.
Thanks for the insight gstevenbray, that explains alot. It can be mighty hard to pick a good broker because there are so many. You’re always afraid you’re not getting the best rates and terms because they aren’t using a certain lender. What are the best rates and terms you all are seeing for commercial loans? I could at least have something to compare with…
Steven makes some good points. The only thing that I might add is that once you find a good broker stick with them. In today’s market many brokers are starving for business and will say anything to get a customer in the door and signed on the dotted line. Even though they may have no clue where to place the loan. This board is dotted with posting from investors asking the simplest questions in regards to why their current broker can’t get a simple no-seasoning NOO cash-out done in a timely manner or why their transaction is taking 3 months instead of the three weeks they were promised. Many times it is because they went with the guy who was going to save them $12.00 a month on their payment or $150.00 less in closing costs. Meanwhile ignoring the fact that the deal has now dragged on for so long that they have made 2-3 extra payments on the 14.99% Hard Money Loan and totally eaten up most if not all of their savings by going with the “cheapest broker”. In this market knowledge is power and by sticking with a broker who has proven themselves to you in the past, but may not have been the cheapest is still the smart play.
I’ve been around long enough to know that the cheapest usually won’t be the best in terms of service. I’m a value kind of guy - I’ll accept a slightly higher rate with excellent service, but I probably wouldn’t accept a really high rate with excellent service. Just want a good balance of things.
Chris, I might be giving you a call sometime in the future…and maybe some of the other brokers that have posted. Thanks for the replies
Commercial rates depend on lots of factors. I’ll be happy to tell you what I’m seeing, but we probably should take it off line to keep the moderator happy. If you email me, tell me the type of property, the estimated size of the loan, and the location (city, state). (Even if you don’t have a transaction in mind, give me a hypothetical situation.) That will be enough for me to give you some ideas.