Hi, it’s Dave Holland with Veterans National Mortgage.
Here to talk about the difference between banks, direct lenders, and independent mortgage brokers. There’s a lot of confusion about the three, what they do, which one is better, and which one is the best for you as the consumer.
So we’re going to go through the pros and cons of each. I will try not to be biassed as I am an independent mortgage broker, sorry about that upfront.
So with banks, the pros to the bank are obviously they have a lot of locations. So it’s very convenient for the consumer. You can go down to your bank, you can go and take cash out, they have a lot of various functions that you can do at that bank. That’s where most people keep their money. So there’s a lot of trust with the bank, simply for the fact that that’s where you have your money. You would assume that if you got a mortgage with your bank, that that would be the place where you would get the best deal.
Unfortunately, that’s not always the case. Also, you can be face to face with your loan advisor at the bank. So for the banks, it’s usually a convenient location, there’s a lot of locations at the bank, their brick, and mortar is what they’re called. You can walk into your bank, and you can get cash or you can get checks, whatever the case may be.
So there’s a lot of trusts that are built up with banks, because of that factor. That’s the place that has my money, I should get the best deal at that bank. You can also be face to face with your loan officer at the bank. You know you don’t have to call them on the phone, they’re usually at that branch on any given day that you come in. So they can help you face to face with whatever type of transaction you’re looking to do.
On the bad side for the bank is the same as the good side, there’s a lot of locations. So it’s expensive. If you have a bunch of brick-and-mortar locations that folks can walk into, that means that you’re paying a lot for that location that transfers over to interest rates on the mortgage.
Also, because the banks, that’s not the only thing that they do, usually they’re limited in their programs. So if they have either conventional or FHA, they usually specialize in a type of loan program. Because it’s really difficult to be good at all of them if that’s not what you’re doing full time.
Sometimes it’s also difficult to get ahold of a loan person. My personal bank that I go to my loan person that handled transactions was only there on Wednesdays, I remember. So it was really difficult to set up a time because I couldn’t get there on Wednesdays.
The other issue with banks primarily is their speed. So a lot of banks because of how many people that they deal with on a day-to-day transaction, not only could I not set up an appointment to see my guy. Once we got the loan transaction into place, it was a very long arduous process 45-60 days, sometimes longer than that.
The also the teller or banker that you may deal with, sometimes they may be part-time, sometimes they may not have a whole lot of experience. Because again, that’s not what they do full time. They don’t do mortgages all the time. They’re there only in certain locations at certain times, so that they can help the customers.
“Once we got the loan transaction into place, it was a very long arduous process 45-60 days, sometimes longer than that. ”
The Direct Lender, on the other hand, the direct lender is a mortgage bank that that’s all they do as mortgages, so you can’t do any other transactions with them. They have still some brick and mortar locations that you can walk into, but not as much as the retail banks. So that convenience dwindles just a little bit.
On the other hand, they have a lot more technology, because they do only handle mortgages. They’ve kind of crafted that technology over the years. And their technology is much better than a retail bank. So when you go over to them, you can do your application online, you can handle a lot of the functions with DocuSign, and complete your mortgage application. Everything is done online or via you know email even, some of them. So that is a bonus with those guys.
They also have more products. So the direct lender, some of them they carry their own money or help finance that with their own money. So that allows them to have more products available than a typical bank would not. Because they can, they can be a little bit more flexible in what they you know what they will lend on.
With the direct lenders, again, some of the bad is they’re a little bit slow. So, you know, again, with size, unfortunately, comes, you know, stress on how fast they can actually complete a purchase or a refinance transaction.
A lot of that has to do with many layers of management. And just having a lot of people handling a lot of loans, tends to slow the process down quite a bit.
Those extra layers of management as well are going to come at a cost to the consumer. So, unfortunately, if you have this huge corporation that is helping with the mortgages, the cost to the consumer becomes pretty dramatic, because they have vice presidents, and vice presidents, vice presidents, and those layers of management tend to hurt the consumer more than help, as far as the interest rates and the fees that they have to charge.
A lot of the direct lenders have a call center type setup, which generally consumers do not like. Maybe you get the same loan officer maybe won’t, it kind of ends up being almost like a customer service representative, instead of an actual loan advisor that will help you with your loan. And a lot of consumers do not like that.
“With the direct lenders, again, some of the bad is they’re a little bit slow. With those extra layers of management as well, are going to come at a cost to the consumer. ”
The Independent Mortgage Broker is the best option for the consumer. And let me tell you why. With an independent mortgage broker, they do not have just one, or two, or five lenders that they deal with. They actually shop hundreds of lenders for the consumer and find the best deal and the best interest rates for that consumer.
If one lender doesn’t have a particular product, or it is not competitive in that product, they can change to a different lender that has a better interest rate or lower fees. It used to be in the old days, mortgage brokers were slower, they had worse technology than the direct lenders. So the direct lenders really had a one-up because they can complete transactions faster and they had that technology.
Now, the technology has come up to speed for brokers. So that competitive edge for the direct lenders has shifted to the mortgage broker world. So now not only do they have the best interest rates and the best, lowest fees for the consumer. They have the ability to change lenders, and they have the best technology. So that playing field has been evened. And now the mortgage broker is actually the best as far as technology, speed, service, fees, everything.
The mortgage broker also has many more products than the retail bank or the direct lender. And again, this is because we don’t shop just one lender, or two, or five. We have many different lenders to shop from, so you can see what product is going to be best for that consumer.
The experience is another benefit of an independent mortgage broker. In order for us to get licensed, it’s a much higher regulation that takes place we have to have much more experience than anyone that is in that direct lender or the retail bank facilities.
So the cons of the mortgage broker is that trust from people that go to their bank every single day or twice a week. You know, sometimes not knowing who that mortgage broker is, or if they have a good reputation is something that can hold consumers back. That’s why it’s very important even when you choose your mortgage broker to look at their reviews, look at how they do with clients. Ask your friends you know they are the local presence there. So they should be known to everybody. So you can always ask, ask the mortgage broker what have you done or who have you helped, and if they do a really good job, they will have those reviews and you can check that out.
The other con is for the mortgage brokers is they typically don’t have a whole bunch of locations. It’s by design, they are local to the community. So they don’t have, they don’t have 10, 15, 20 different locations. This to the consumer should be better though, because without those locations, they do not have the high overhead, they can keep those fees and those interest rates very, very low for the consumer.
Also, unfortunately, with the independent mortgage broker, you cannot, they don’t offer other services. So we only do mortgage, you can’t go and get cash or get quarters or anything like that from them. So that’s again, you know, they only handle one type of transaction, it’s strictly mortgage. And that’s truly why they’re there the best for the consumer.
“If one lender doesn’t have a particular product, or it is not competitive in that product, they can change to a different lender that has a better interest rate or lower fees.”
Okay, guys, that’s all we have for today. Thanks for listening. Hopefully, that cleared up some of that confusion for the broker, versus lender, versus bank scenario. You can go to our website at veteransnationalmortgage.com, follow us on Instagram and Facebook, or click apply now on our website. And you can give us a call at 888-922-2022. And if you have questions, we would love to answer any questions that you have.
Veterans National Mortgage | NMLS #2006604 – NMLS Consumer Access Portal
Thanks for watching.