When you go to McDonald’s and order a hamburger, you know exactly what you’re going to get. All McDonald’s burgers have a certain sameness, no matter if you order the single, the double, or the one with cheese. McDonald’s has one beef burger with certain variations. If you want more gourmet choices, you need to go to a more upscale restaurant. Which usually costs more.
True enough, but what if you could get that better burger at the same price as McDonald’s? Would you choose to go there instead?
When you walk into a bank or credit union, it’s a lot like walking into McDonald’s: they have their own loan products to offer and nothing more.
It’s “one flavor fits all.”
If you don’t fit into their mold, you’re out of luck.
On the other hand, if you choose to do business with a full service mortgage company or a mortgage broker, that loan officer has a whole smorgasbord of loan products to offer. This is because he or she can shop a variety of wholesale mortgage lenders to find the best (and least expensive) one to fit your situation.
Do You Know About Wholesale Lenders?
Many people don’t know there are wholesale lenders. When you walk into your local bank, that is retail. Did you know that your bank might also have a wholesale division? Those offices are often located in a high rise building or tucked inside a sprawling business park.
They don’t advertise on radio or TV, and they do business with the public. You have to be a broker representing a client to get a loan from them.
They may have different or more generous underwriting guidelines. Sometimes they offer better interest rates, too.
Having a “Plan B” Option is Better!
Not long ago, a home owner came to me asking for an FHA Streamline Refinance. I sent the loan application through our own in-house lending, but unfortunately, it didn’t work out. If I’d been working at a bank, that would have been the end of the story for the home owner. But because I can also shop wholesale lenders and broker out loans, I was able to find the perfect match. The home owner is lowering her interest rate by a full 1% and saving a significant chunk of money as a result.
The Best Mortgage Lenders
Call me biased if you like, but I favor having more loan choices.
Sure, the job is easier when you’ve got only one menu to choose from, one set of loan products. But that’s not always best for the consumer.
When I first started working in the mortgage business in 1999, I worked for a direct lender that had only one set of loan products. It was a good way to learn the basics and get started. But after a year and a half, I had to move on and up. I needed to be able to offer more choices in order to serve more people. Now I work at Cherry Creek Mortgage Company, a full service mortgage lender. I like having more choices to offer.
Thank you for stopping by my blog. I appreciate each and every reader.
Just in case you’d like to know, I am state licensed in California and Washington. (NMLS License 1284134) You can learn more about me here. There’s a “Meet Carolyn Warren” section at the bottom of that page.
Real life scenario. Which loan would you choose?
A young married couple was buying their first home. They compared two offers. One from a credit union they were members of; the other from a full service mortgage company where they knew the loan officer to be honest and ethical.
Both loans had the same interest rate.
The credit union had two lender fees = $96
The full service mortgage lender had one flat lender fee = $1,395
Title, escrow, recording, property taxes, insurance would be the same with either lender.
After one week, the credit union had not yet responded to their online application or phone messages.
The full service mortgage lender responded with a phone call within the hour and followed up with an email the next day.
Which of these lenders would you choose?
The young couple chose the credit union. As the wife said, “We were both members before we were married, and we love our credit union.” They also wanted to save money on the lender fee.
It took several more weeks of making more phone calls leaving messages to get the credit union to respond. By the time an application-taker got back to them, the interest rate they saw online had gone up. Nevertheless, they proceeded.
Six months and ten days later, the loan finally closed. In the meantime, interest rates had gone up even more. They had to pay five more months’ rent than they would have with a 30-day closing.
If they had locked with the full service mortgage lender, they would be making a smaller monthly payment every month for the life of the loan, and that would have quickly made up for the higher lender fee.
What’s more, they would not have gone through the extra stress and anxiety. In the end, the wife said to me, “We hate the credit union!”
There’s More to the Story!
But it gets worse. Shortly after closing, the credit union sold their loan to a national mortgage company that they dislike and don’t want to do business with. So they didn’t end up getting their beloved credit union as their loan servicer anyway.
I have a friend who is a waiter at Ruth’s Chris Steak House. He says, “If you want a great steak, go to a steak house. That’s our specialty.” In agreement with this principle, I say, “If you want a great mortgage loan, go to a full service mortgage company, not to a lender that specializes in checking and savings accounts, car loans, boat loans, signature loans, and throws in some mortgages to the mix.”
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