“So are you a broker or a lender?” “Or a banker or a lender?” “Or a broker/banker?” Yes, yes, and yes!
We get this question all the time, but I think it comes from a good place. Naturally, everybody shopping for a home loan wants to get the best rates and terms and some confusion swirls around how the type of mortgage originator one uses has a bearing on the outcome. So when they work with me, who is really behind the curtain?
[Too lazy to read the rest? Watch the video below instead.]
Banker / Broker / Lender
In the post-downturn lending industry, there are really only three primary channels for obtaining a residential home loan; mortgage banker, mortgage broker and mortgage lender. It’s important to know that no matter which you choose there is ALWAYS a “middleman” and that person is called the mortgage loan originator or “MLO.” Now don’t confuse an MLO with a single individual — it could well be a call center with a series of “clerks” that work to get your loan from start to finish. Regardless, there are some distinct characteristics of each channel:
- Lender: This is usually a single-entity banking institution that will fund your mortgage with their own money (most of the time…). Maybe you have a checking or savings account with this bank already. A lender will have its own specific set of guidelines for a jumbo loan and it may have its own “overlays” for conforming and government loans, like FHA and VA. Overlays are defining characteristics — let’s say a minimum FICO score, for example — that are technically not a guideline of the government-sponsored entities (Fannie Mae and Freddie Mac), but that are adhered to by this individual institution on top of the standard guidelines. So, if you’re going to be a customer of a direct lender, you have to meet their guidelines. If you don’t you won’t qualify with them.
- Broker: A broker can be seen as the opposite of a lender. A broker has none of its own money to lend, but instead works with many lenders to offer a variety of options to its clients. A broker just may have more flexibility to get some scenarios approved, though when they are in the process of doing so, they turn the control and authority of the file over to the lender.
- Banker: An independent mortgage banker fits between the lender and the broker and can often offer the services of both. Instead of lending its own money, an “inde” will have warehouse “lines of credit” from lenders and will have authority to fund loans with that money. Thus, an independent mortgage bank has a combination of in-house control over your application and the ability to match a specific profile to a specific lender. Many indes can also broker loans when brokered options prove to be the best fit. Guaranteed Rate is one of the nation’s largest independent mortgage banks, for example.
Who Has the Best Rates?
Great question! But you won’t find the answer here. And you won’t find the answer anywhere but in your own research. As mentioned above, there are many complex factors that go into a consumer’s rate and the entity type alone does not exclusively determine the outcome. Can a broker beat a lender? Yes. Can the opposite be true too? Absolutely. It’s very important to note that many originators advertise exclusively based on rate, but for consumers it’s practically impossible to shop exclusively on rate — there are often too many variables for the scenario, let alone the fact that rates can change every day.
What a Roundabout!
Not really. The purpose of this blog is not to get you to resign to the fact there’s no one option better than another. In fact, by understanding the differences, it may help you get best positioned to optimize your research. For 10+ years, I have worked for an independent and the reason I really enjoy doing so is because we can say “Yes!” to more clients. We have a great variety of choices when it comes to programs, rates and terms and this power, when understood and effectively communicated gives, I feel, our customers the edge in today’s market.
I’m happy to discuss the mortgage industry and what we can do for you today. Get in touch any time and I look forward to being of service! And of course, you can always begin the pre-approval process, free of cost or obligation, by clicking HERE.
So much better than a,
Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283
