Why More Than Half of Home Loans Aren’t Done Through a Bank
If you could finance your next home “wholesale,” would you? If you knew that your loan officer had every incentive to get you the best deal and to close on your loan as quickly as possible would it matter? If you found out that being turned down by a bank might not mean your credit isn’t good enough to get a mortgage would it cheer you up?
Probably you answered “yes” to all of those questions. And if you’ve been wondering whether you want to finance (or refinance) through a bank or a mortgage broker we’re about to answer that question for you. Here’s why more than half of U.S. mortgages are originated by mortgage brokers, not banks.
Where Does the Money for Your Home Loan Come From?
Mortgage brokers also go through lending institutions, in fact they’re sometimes the same banks and lenders you’re used to hearing about like Citibank, Wells Fargo, and more. But brokers work on the wholesale side of the equation while your banker is writing your loan from the retail side.
We also have access to institutions that are called “banks” but are not the same banks that you can go to for a loan. Those loans are also approved at the wholesale rate.
Your bank most likely sends your loan file out to be underwritten in another state. That practice doesn’t allow the transparency or flexibility you need in the complex mortgage environment we’re working in today. Because we offer in-house underwriting and work directly with underwriting and processing we can be more flexible, and completely transparent, about all aspects of your mortgage.
Banks are restricted to the loan products they currently offer. If none of those products are a perfect fit for you then they only have two choices; they can lose your business or talk you into one of their products.
We don’t have that restriction and can search through hundreds of funding sources to find the deal that’s right for you.
Who Are You Working With and Why Would They be on Your Side?
We certainly don’t want to suggest that your banker doesn’t care about your business. It’s likely that they do. But it’s also likely that they are salaried. They will be paid whether or not you get the loan, regardless of when you get the loan, and regardless of whether or not you get the loan that’s best for you.
Our loan officers are only paid if and when your loan closes. Not only do they care about you and your business, it’s in their best interest to be your advocate and make sure you get the right loan as quickly and easily as possible.
It’s even likely that your bank representative isn’t licensed to do mortgages. Since banks are protected by the FDIC your banker doesn’t have to be a Licensed Loan Officer in order to handle your mortgage application. They can act as a kind of “order taker,” gathering your information and processing the paperwork, only to send it on to a loan officer you’ll never meet. For that loan officer you’re simply a file full of data, not a real person. Of course, we only do mortgages. So you’ll be working with a Licensed Loan Officer from your first conversation until you close on your loan.
We also have an advantage that banks don’t have, and even most mortgage brokers can’t offer, in that we do in-house underwriting. While your bank representative is paid whether or not you close on your loan, even if they are motivated to help you close quickly, they’re working with an underwriter who is probably serving many banks and your representative doesn’t have the leverage to move your loan along any faster. Our Loan Officers and underwriters work closely together to close on your loan in as little as eight days.
If a Bank Turns You Down Does That Mean You Can’t Buy Your Dream Home?
Finally, if you are concerned about being turned down for a loan, or if you have been turned down by one or more banks, it might help to understand how banks view your application. Each bank is backed by investors, and those investors set their lending guidelines. If your application doesn’t meet their guidelines, no matter what your credit worthiness actually is, you will be turned down. There’s nothing your banker can do about it. Banks may tell you they make the underwriting decisions, but they have to follow their investor guidelines in doing so.
When you work with one of our Licensed Loan Officers we don’t get discouraged if your application is refused by one lender – and neither should you. We’ll just take it to another lender. But probably your loan officer will have a pretty good idea which lender is most likely to approve your loan so that may never even be necessary.
Quite likely your banker means well, and wants to take good care of you. But the truth is that when it comes to mortgages they just don’t have access to the same lending resources and they don’t have the same training and incentives that make our officers so effective at getting you into your next dream home with a mortgage plan that’s right for you.
We’re here if you need to close on your dream home fast (we are, after all, the “home of the 8 Day Close”) and we can help you get the right mortgage for you even when your credit isn’t great. Call your local office, or fill out our easy on-line form, to get one of our licensed loan officers working on the right financing to get you into the home of your dreams!