They’re two different animals – mortgage brokers and mortgage bankers. And if you don’t know the difference between them, it’s something that can end up costing you a lot of money, unnecessarily.
The truth is – not every mortgage lender is created equal. As with any business – you want to work with a reputable company that provides good service. You’re also likely to do a little online research to see what previous customers have to say about their experiences. (If there’s one thing consumers aren’t shy about, it’s letting the world know – in a very public way – how they felt about their transaction.)
“But the problem is,” according to Rick Piette, owner of Premier Mortgage Lending, “is that once you’ve gone that far, you’ve already missed the most important step: Deciding which is the right choice to begin with.”
So let’s get back to the basics with a little apples-to-apples comparison of how a Mortgage Broker compares to a Mortgage Banker.”
How a Mortgage Broker Works
1) The key advantage of a mortgage broker is that borrowers complete a single loan application – and with that information, the broker has the ability to shop with numerous banks and lenders simultaneously to find the lowest interest rate and/or the best loan program that can be structured to suit your financial goals. It’s one-stop shopping that works for you.
2) New Federal Regulations in the mortgage industry (that went into effect in 2014) – place restrictions on the amount a mortgage broker can earn on your loan. What that means to the buyer is this: A broker can now make you a true No Fee Mortgage. (Not all of them choose to do this, but Premier Mortgage Lending is one that does.)
3) Brokers are typically small, locally owned companies – consisting of people you know as part of your community, They live, work and are invested in your town – just like you. They have a low operating overhead, and with a mortgage broker, only two people will make money on your loan: The Loan Officer and the Owner.
How a Mortgage Banker Works
1) Typically, mortgage bankers are ‘direct lenders’ who offer loan programs and services from a single bank. This limits the borrower’s ability to see all the loan options available for his circumstances – unless he wants to make multiple loan applications with various banks or mortgage bankers – a task that only takes up your time and resources.
2) With new legislation passed through the Dodd-Frank Act that became law in 2014 – neither banks nor mortgage bankers are subject to earning limits on a mortgage loan. As a result, ‘invisible charges’ and ‘undisclosed income’ generates additional income for the lender that buyers may not even be aware of (but they may pay for it in the form of higher rates or higher fees).
3) Mortgage banks (and banks) are large operations with layers of low, middle and upper management. Every one of whom receives income from making your mortgage loan. So everybody gets a piece – including the Loan Officer, his Manager, District Manager, Assistant Vice President, Vice President, Sr. Vice President, and right on up the line.
What’s important to buyers is that they should be looking to find the best deal for their loan: the one that costs them the least amount of money, either out of pocket or over the loan duration. To get there, we’d like to remind you of one very important point: A “No Fee Mortgage” from Premier Mortgage Lending is exactly that.
Unlike some loan offers that seem too good to be true (see our article entitled “Getting A Credit Towards Closing Fees”? What That Really Means.” for more information on that) – this loan product represents itself clearly : Borrowers are charged $0 for Loan Origination, Underwriting, Document Prep, or other ‘junk fees.’ And unlike mortgage bankers, the laws that govern mortgage brokers require all of our fees to be fully disclosed and visible on your Loan Estimate. (No hidden or invisible costs here.)
So when you request an initial Fee Sheet from multiple lenders, be sure to take a close look at those line items on the form. Because if they say more than $0 – you may be paying too much. Sometimes, thousands of dollars more than you need to – to get the exact same mortgage loan.
Still have questions? Rick Piette will be happy to answer them, and even if you plan to shop other lenders (which we always encourage our customers to do) – he’ll help you to understand the differences and know which questions to ask. Putting the power of choice about your mortgage loan back in your hands – it’s our mission. Visit KnowBeforeYouOweNevada.com to learn more.
Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.