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The Difference Between Mortgage Brokers and Mortgage Bankers

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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.

Trends Converge Illustrating Home Ownership Is On The Rise

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It’s not uncommon to find conflicting stories about current trends in the U.S. that pertain to the status quo of home ownership. Since the housing market collapse in 2008, it’s as if everyone suddenly acquired their own ‘crystal ball’ – claiming to know when, or how or where to make your next move into real estate.

But now, enough time has passed to allow us to view things in perspective. Actual data replaces “best guesses” and reveals real economic, geographic, and demographic statistics as they affect (and reflect) the state of the U.S. housing market. Plus, studies conducted by industry leaders have been implemented and tracked over time to help us determine how best to serve the homebuyers of the future.

Right now, there are several trends that indicate our industry is on the verge of a new upswing, for several different reasons.

Home Sales in 2015 Expected To Be At Highest Point Since 2006 This growth projection by the National Association of Realtors is driven by the combination of strong job growth, low interest rates and a gradual loosening of lending standards. Early results this year indicate that buyers who have been kept out of the market by those restrictions are beginning to return, and it is anticipated that 2015 will be the first time since 2008 that single-family home starts will exceed apartment starts.

Did you know? In most markets, the cost of renting is roughly twice the cost of owning a home. In reality – people have to live somewhere – whether they own their residence or not. And many are now realizing that it just makes more financial sense to buy than to keep renting.

The Future Plans For Most Millennials Include Home Ownership. Millennials, or “Generation Y” – whatever the popular term you use to describe them (maybe it’s even “son” or “daughter” in your case), they’re big numbers in our society. Approximately 80 million in the U.S. alone meet this demographic description, generally acknowledged to be those between 19-36 years of age today. And according to a recent study by the Urban Land Institute, this group is poised to begin moving into the home buyer’s market in droves – an estimated 70% are planning to do so within the next 5 years. And that’s a whole bunch of first-time homebuyers entering the marketplace.

Department of Commerce data shows that in 2014, more millennials moved from the city to the suburbs, a significant change for a trend that has historically operated in reverse. And this is a generation that faced a host of new challenges: mounting student debt, stricter mortgage qualification standards, and until the past year, weak job and wage growth. It’s becoming clear that these hurdles may delay the step, but ultimately, they want to own homes of their own for reasons that will sound very familiar: marriage, starting families of their own, or even simply this: “I want a yard.”

Financial Regulations Continue To Evolve In Favor of Consumers. As we have reported before, the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act has brought sweeping changes to the home mortgage industry – and additional regulations continue to go into effect as the calendar progresses. In addition to laws that now limit the fees able to be collected from buyers by mortgage brokers (although the same does not apply to banks or mortgage bankers) – this fall is scheduled to see new rules go into in effect with regard to documentation, Good Faith Estimates, and advance disclosures prior to close of escrow regarding your mortgage loan’s terms (translation: No more surprises for consumers.)

Buyers Have More – and More Affordable Options – For Home Mortgages. Gone are the days when banks and mortgage bankers held all the cards for buyers when it came to obtaining a home loan. In the lending industry – as in every other area of consumer spending today – buyers are more in control of their mortgage destiny than ever before. Shopping for the best interest rates and the lowest costs for a new loan can yield tremendous savings for home buyers that still comes as a shock to many (the ones that are used to ‘the old ways’). One example: Premier Mortgage’s clients literally save thousands of dollars in cash-out-of-pocket at close of escrow using our popular “No Fee Loans.” “The ability for consumers to close a home loan and pay absolutely no lender fees is a huge plus for homebuyers,” says Rick Piette, owner of Premier Mortgage Lending.

These are just a few of the recent reports hitting the newsstands these days, and taken collectively, it all points to the fact that for consumers, the “home buying playing field” is finally leveling off. That just might make now the best time in a long time to plan on moving into a home of your own.

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.