Is a Bank Better than other Mortgage Companies?

Need a Mortgage Loan? Where do you get the best deals? Banks? Brokers? Direct lenders?

Minneapolis, MN: Getting a mortgage loan feels complicated and overwhelming for many people, as they worry about getting the best mortgage deal.

Generally speaking, there are three ways to get a mortgage loan: From a Bank or Credit Union, a Mortgage Broker, or a non-bank direct lender (also known as a correspondent lender). All three will get you a mortgage loan, but which one gives you the best deal?

Almost without fail, your best bet is with mortgage brokers and non-bank direct lenders, and your most expensive is with banks.

Why are banks usually more expensive?

It is actually really simple. All lenders get their money from the same bond market on the same day at the same time. All lenders closing costs are virtually the same. All lenders have the exact same base fees, and third party expenses to pass along (appraisal, credit report, state deed taxes, title company expenses, origination, processing, etc).

So if all lenders get their money from the same source, have the same basic costs, and underwrite to the same guidelines, why are they more expensive? Profit margin. Profit margin is where it is really at when comparing lenders. The bigger they are, the more they advertise, the faster you should run away. This also included big internet lenders – like the so called “Quick” one.

You see, if my wholesale cost of the loan is the same as everyone else, but I don’t have all the overhead of bank branches on every corner, and I don’t have the overhead of all the advertising they do – I can offer better deals. It is no more complicated than that.

The other big items is that there are shopping advantages as well to not use a bank. When a customer uses a bank, they only get the bank’s loan products, that one banks rates, and generally a Loan Officer who is more than likely an unlicensed application clerk versus a fully licensed professional Loan Officer. Non bank lenders generally have multiple wholesale lender contacts so they can shop between them for a better rates, and more product choices.

Why Brokers and direct lenders are better

The whole concept of mortgage brokers is they are usually smaller, they can do it faster, and with less overhead. They get a wholesale price for the money from the big banks for delivering a loan to them dramatically cheaper than the bank can do it for themselves, and that better deal is pass on to YOU!

Correspondent direct lenders are even better, as they are sort of really like a broker on steroids. These companies, unlike brokers, actually shop various lenders nationwide for final placement of your loan, but underwrite and close the loans themselves before sending it to the big banks after closing. Because correspondent lenders do even more of the process than brokers, , many of their relationships often produce significantly better deals for the consumer.

The Bottom Line

The bottom line is that there is no one source that is always the best or cheapest for every situation. If one lender was always the cheapest, eventually, everyone would know about it, right? The only other way most lenders can compete with one another is to somehow convince the public that they have some “secret way” of providing lower than market rates. The market is the market and you pay for it one way or another.

Only work with a professional mortgage company where the loan officers are skilled at the mathematics and can explain it in plain English. Don’t feel pressured, and stop looking at just rate, or just cost! Don’t gamble with something as important as your mortgage. LET US “DO THE MATH” by giving you our Total Cost Analysis report.

Let us show you how you can free up a LOT of money for investments… We provide visual calculations that show how “paying off” the home, versus “financing” the home isn’t always a great idea.

Minneapolis / St Paul, MN: These days, everyone seems to know their “credit score”. Many people subscribe to one or all 3 credit services, or get a score from a place like CreditKarma.com.

Before you get too excited about that credit score, understand that the score numbers you just received most likely was based on the “Advantage Score” model. While that IS a credit score, that is NOT the same scoring model mortgage companies use.

There are many different ‘types’ of credit scores.

Mortgage lenders care about how you handle mortgages, credit card companies care about how you handle credit cards. The reports these industries pull tend to be weighted towards their industry. The Advantage score you get when you look at your score, or from your credit card statement simply is NOT the same scoring model lenders use.

Another way to look at is is think about buying a car. You tell someone you bought a new Ford. Great, but what model Ford? Did you get a Ford Focus, or was in a new Ford Truck?

Getting your credit score somewhere?? Great, what scoring model is is based on? They are generally all FICO scores, but what scoring model is it based on?? Advantage score, Beacon Score? Typically the Advantage Score is noticeably higher than your mortgage score.

If the credit score you are looking at is from a mortgage company, then that should be accurate if any other mortgage company pulls your credit… Or at least until something changes, and credit scores can potentially change everyday. I’ll save that for another article…

Ultimately, the ONLY credit score that matters is the credit score your Loan Officer obtains on the day you start your mortgage application!

For most people, the score you see and get on your own, or through your credit card statement are close, and give you a ballpark idea of your lender score, but don’t be surprised when we tell you a different number.