Pine Valley Loan Programs

Banks vs. Mortgage Companies

Many people describe the mortgage lending process as a tangled maze, difficult to navigate. Years ago this may have been true, however with the advent of Web lending services the process of securing a loan is becoming more and more simple. The following article is an introduction to the institutions that lend money to consumers for real estate, the process of securing a loan, along with some basic information on how lenders decide whether or not to lend to a borrower and his/her property.

Brokers versus Bankers - Product Selection

Some mortgage sources are direct lenders such as banks and mortgage bankers with retail establishments. Usually banks or mortgage banks will be competitive in one or several products, and will encourage their sales agents to sell these products to the consumer. Many times banks will not even necessarily try to be competitive in rate, but will instead try to fill a niche, such as quick approvals or flexible underwriting (easier approval) of loans. Going directly to the bank or source was probably the way that your parents obtained their home loan, but the trend is clearly away from such direct establishments towards the brokerage or ``multi-lender platform'' as brokers are now being called on the Web.

Brokers or multi-lender platforms represent a number of lenders and offer these lender's products through a wholesale arrangement.  So the broker can offer wholesale rates, as opposed to retail rates. The lender will then compensate the broker when they deliver a loan to them and this compensation is invisible to the borrower. Many banks that offer retail or wholesale loans will allow the broker to charge up to 1% of the loan amount for their compensation. By offering wholesale rates, a broker can in fact be more competitive than the retail side of the same bank. This is happening more and more as brokers are moving their services to the Internet and reducing their costs of distributing loans to the consumer.

Multi-lender brokers on the Internet can be the most competitive source for mortgage loans available. However, be wary of multi-lender sites that limit their choice of lenders to less than 10 sources. Many such sites are charging the bank to participate and can not offer unbiased selection as they are captive to their lending sources.

Brokers versus Bankers - Service

Direct lenders are captive to their own products. That is, they will not provide unbiased advice nor selection, since by doing so they will possibly risk losing your loan to the company whose product truly provides you the most value.

Brokers on the other hand can sell a variety of products, from multiple sources, and can be objective in their recommendations. The compensation provided from one lender is equal to that from another lender, therefore the outcome of the recommendation doesn't matter. What does matter is giving you the best loan for your needs.

If you walk into your local bank, S&L, or retail mortgage bank they'll usually take your application there, perhaps underwrite your loan there, and lend their own money. If your loan is declined for whatever reason, you will need to begin the process again with another source. With a multi lender source, you have another chance if one lender doesn't approve your loan.

Bankers make their salary whether you take the loan or not. Brokers only get paid when the loan closes. Who has the most motivation to get you a loan?

Home Buying Made Simple:

We have easy over the phone or online pre-qualification to make the home buying process a little easier for you. Getting pre-qualified should be the first step you take. You can join our referral network and make it even easier. We have the Banker, Realtor and Builder all under one roof. We are the One Stop Shop for all your needs.