There are Three Main Types of Mortgage Lenders
Most potential homeowners are unaware that they currently, have 3 options when it comes to getting a home loan.
While it might not be blatantly obvious to those outside of the mortgage industry, those that work within the industry share a common secret: Wholesale lending will typically give the person looking for a home loan the best rates. To the contrary, both correspondent and retail lending situations provide the most profit to the bankers.
Many homeowners make the mistake of turning to banks or using the in-house lender of their real estate agent, when it comes time to get a mortgage. For many, they are the most obvious choice, mainly because home loan services are usually offered at the customer’s primary banking institution or their agent tells them to use a certain in-house mortgage person. But, that does not mean it is the best option for you, the client.
Wholesale rates, offered by wholesale mortgage brokers, can be substantially lower than the retail interest rates you’ll get with banks, in-house mortgage lenders, mortgage bankers / direct lenders and credit unions and the ONLY WAY you can access wholesale rates is through a wholesale mortgage lender. For examples, see below.
BANKS (RETAIL LENDERS)
Examples – Wells Fargo, CHASE, B of A, Navy Federal Credit Union, US Bank, USAA, Union Bank, Everbank, Citibank, Golden 1 Credit Union, HomeStreet Bank.
There are banks that work directly with homeowners to provide financing on the retail level with retail rates. Almost all have retail branches and offices with excessive overhead. One of the big misconceptions out there is that big banks are easier to deal with. That is not true; the bigger the bank is, the more bureaucracy you will have to deal with. That actually makes it harder for you to get a loan. Just because you bank there, DO NOT think they are giving you a good deal. These lenders also do not have to disclose their commission to you, so you do not know how much of your lender credit is built in for them as profit.
TIP - Banks are TERRIBLE with VA and FHA loans. Please call Derek and his team if you are considering either a VA or FHA loan. They are also typically very slow and close late, which puts your deposit at risk. And unless you are a vanilla 20% down or more borrower with a 700 score or higher, they aren't very good. They have high mortgage insurance rates with 5% down or 10% down loans.
CORRESPONDENT LENDERS (MORTGAGE BANKERS / DIRECT LENDERS / IN-HOUSE LENDERS)
Examples – Academy Mortgage Corporation, Fairway Independant Mortgage, Homeowners Financial Group, Quicken Loans, Guild Mortgage, On Q Financial, CNN Mortgage, Veterans United, Movement Mortgage, Loan Depot, Nova Home Loans, People's Mortgage, Cornerstone Mortgage Group, Pinnacle Capital Mortgage, Caliber Home Loans retail, CMG Financial retail, Amerifirst Financial, Guaranteed Rate, Prime Lending, People's Mortgage, New American Funding, Greenpath Funding, Skyline Home Loans, Keller Mortgage, Home Services Lending, Cross Country Mortgage, Benchmark Mortgage, Synergy One Lending, Cornerstone Mortgage, Freedom Mortgage retail, JMJ Financial, First Choice loan services, HomeBridge Financial, etc.
These are mortgage bankers / direct lenders that work with homeowners to provide financing on the correspondent level. These lenders have branch offices (massive overhead to pay for) and offer their own retail/correspondent mortgage rates, mainly by using their own warehouse line of funding. They make a big deal of having this “in-house” capability to you, the client, and saying that they are able to maintain control of the loan and that’s a big plus. But, Derek can tell you from experience, it’s not a big deal AT ALL and more often than not, they don’t even have this “in-house”. They might just have it at the corporate office somewhere or a virtual underwriter in some other state and so they are saying it is “in-house” to you. Either way, in this day and age, this does not matter at all. Derek and his team have their own processor as well as direct access to the underwriters and the closers / funders. Also, these direct lenders typically have stricter underwriting guidelines and A LOT less options than wholesale lenders do.
These are also the in-house lenders at most real estate companies. Anyone who says they are a direct lender or mortgage banker typically fall into this category. They do not have to disclose their commission, so you do not know if you are getting the best deal. Also, did you know that the real estate office gets money when you use their in-house lender, even though it is a completely different company? If your Realtor is directing you towards the in-house lender, be careful and talk to me and let’s compare rates and programs (but some Realtor’s don’t even know all of this, so they may not be to blame).
When Derek found out how much money is actually made on a loan on the retail and correspondent sides, it became very clear to him that you, the client, is losing. That’s why their rates are higher, more money is made and more money is paid out per closed file to many different people as well as massive overhead costs to pay for. At one correspondent lender Derek worked at in the past, he counted 9 different people getting paid when he closed a loan. That is just crazy.
MAJOR TIP - The way that banks, credit unions, direct lenders and mortgage bankers price their rate sheets, to give you the market rate you should be getting, there is just not a lot of lender credit available from them. They are just not set up to even be able to offer this to you like Derek can and will since they just keep it as profit for themselves.
When you work with Derek and his team, they will show you your rates and lender credits upfront, instead of just verbally telling you and changing it down the road on you (like other loan officers do).
TIP #2 - Direct lenders are terrible with VA and FHA loans. They average around 600 bps (basis points) on FHA and VA loans on the back end. They keep that as profit. Brokers max out at 275 bps and anything at all over that goes directly to the borrower to help with closing costs. Please call Derek and his team if you are considering either a VA or FHA loan. This phone call could potentially save you tens of thousands of dollars or more!
TIP #3 - If you are working with someone or are referred to someone, ask them if they are a direct lender and see what they say.
WHOLESALE MORTGAGE BROKERS
Then there are wholesale mortgage brokers who work as middlemen between the banks / investors and borrowers on the wholesale level to secure financing for homeowners. That’s us. America’s largest wholesale mortgage broker. With us, you have access to over 90 different lenders / investors which we shop for you. Let us find the best rate / loan combination for you and your particular situation, so you don’t have to spend all your time calling around trying to get “real” quotes from different banks. This is why people refer to Derek as “The Human Lending Tree”.
We also have access to the wholesale side of many of the above mentioned retail lenders and mortgage bankers (which means wholesale rates with us). It goes back to retail versus wholesale. Also, as wholesale lenders, we DO have to disclose our commission to you so you know that if there is any extra money at all, it goes straight back to you, our client.
We are also able, many times, to provide you with MASSIVE lender credits towards closing costs for many loan programs (FHA and VA), unlike banks and mortgage bankers / direct lenders. Ask us about this.
TIP - Not all mortgage brokers are created equal, either. Most mortgage brokers are small mom & pop shops who only do a couple loans a month, so they have to make more money on each deal. Because we do so many loans, we don’t make as much per deal and make it up on volume and referrals. So, just as with the previous examples, if you are working with a mortgage loan officer currently or have been referred to one, get a quote, but then have Derek give you a quote to see how it compares.
While it might not be blatantly obvious to those outside of the mortgage industry, those that work within the industry share a common secret: Wholesale lending will typically give the person looking for a home loan the best rates. To the contrary, both correspondent and retail lending situations provide the most profit to the bankers.
Many homeowners make the mistake of turning to banks or using the in-house lender of their real estate agent, when it comes time to get a mortgage. For many, they are the most obvious choice, mainly because home loan services are usually offered at the customer’s primary banking institution or their agent tells them to use a certain in-house mortgage person. But, that does not mean it is the best option for you, the client.
Wholesale rates, offered by wholesale mortgage brokers, can be substantially lower than the retail interest rates you’ll get with banks, in-house mortgage lenders, mortgage bankers / direct lenders and credit unions and the ONLY WAY you can access wholesale rates is through a wholesale mortgage lender. For examples, see below.
BANKS (RETAIL LENDERS)
Examples – Wells Fargo, CHASE, B of A, Navy Federal Credit Union, US Bank, USAA, Union Bank, Everbank, Citibank, Golden 1 Credit Union, HomeStreet Bank.
There are banks that work directly with homeowners to provide financing on the retail level with retail rates. Almost all have retail branches and offices with excessive overhead. One of the big misconceptions out there is that big banks are easier to deal with. That is not true; the bigger the bank is, the more bureaucracy you will have to deal with. That actually makes it harder for you to get a loan. Just because you bank there, DO NOT think they are giving you a good deal. These lenders also do not have to disclose their commission to you, so you do not know how much of your lender credit is built in for them as profit.
TIP - Banks are TERRIBLE with VA and FHA loans. Please call Derek and his team if you are considering either a VA or FHA loan. They are also typically very slow and close late, which puts your deposit at risk. And unless you are a vanilla 20% down or more borrower with a 700 score or higher, they aren't very good. They have high mortgage insurance rates with 5% down or 10% down loans.
CORRESPONDENT LENDERS (MORTGAGE BANKERS / DIRECT LENDERS / IN-HOUSE LENDERS)
Examples – Academy Mortgage Corporation, Fairway Independant Mortgage, Homeowners Financial Group, Quicken Loans, Guild Mortgage, On Q Financial, CNN Mortgage, Veterans United, Movement Mortgage, Loan Depot, Nova Home Loans, People's Mortgage, Cornerstone Mortgage Group, Pinnacle Capital Mortgage, Caliber Home Loans retail, CMG Financial retail, Amerifirst Financial, Guaranteed Rate, Prime Lending, People's Mortgage, New American Funding, Greenpath Funding, Skyline Home Loans, Keller Mortgage, Home Services Lending, Cross Country Mortgage, Benchmark Mortgage, Synergy One Lending, Cornerstone Mortgage, Freedom Mortgage retail, JMJ Financial, First Choice loan services, HomeBridge Financial, etc.
These are mortgage bankers / direct lenders that work with homeowners to provide financing on the correspondent level. These lenders have branch offices (massive overhead to pay for) and offer their own retail/correspondent mortgage rates, mainly by using their own warehouse line of funding. They make a big deal of having this “in-house” capability to you, the client, and saying that they are able to maintain control of the loan and that’s a big plus. But, Derek can tell you from experience, it’s not a big deal AT ALL and more often than not, they don’t even have this “in-house”. They might just have it at the corporate office somewhere or a virtual underwriter in some other state and so they are saying it is “in-house” to you. Either way, in this day and age, this does not matter at all. Derek and his team have their own processor as well as direct access to the underwriters and the closers / funders. Also, these direct lenders typically have stricter underwriting guidelines and A LOT less options than wholesale lenders do.
These are also the in-house lenders at most real estate companies. Anyone who says they are a direct lender or mortgage banker typically fall into this category. They do not have to disclose their commission, so you do not know if you are getting the best deal. Also, did you know that the real estate office gets money when you use their in-house lender, even though it is a completely different company? If your Realtor is directing you towards the in-house lender, be careful and talk to me and let’s compare rates and programs (but some Realtor’s don’t even know all of this, so they may not be to blame).
When Derek found out how much money is actually made on a loan on the retail and correspondent sides, it became very clear to him that you, the client, is losing. That’s why their rates are higher, more money is made and more money is paid out per closed file to many different people as well as massive overhead costs to pay for. At one correspondent lender Derek worked at in the past, he counted 9 different people getting paid when he closed a loan. That is just crazy.
MAJOR TIP - The way that banks, credit unions, direct lenders and mortgage bankers price their rate sheets, to give you the market rate you should be getting, there is just not a lot of lender credit available from them. They are just not set up to even be able to offer this to you like Derek can and will since they just keep it as profit for themselves.
When you work with Derek and his team, they will show you your rates and lender credits upfront, instead of just verbally telling you and changing it down the road on you (like other loan officers do).
TIP #2 - Direct lenders are terrible with VA and FHA loans. They average around 600 bps (basis points) on FHA and VA loans on the back end. They keep that as profit. Brokers max out at 275 bps and anything at all over that goes directly to the borrower to help with closing costs. Please call Derek and his team if you are considering either a VA or FHA loan. This phone call could potentially save you tens of thousands of dollars or more!
TIP #3 - If you are working with someone or are referred to someone, ask them if they are a direct lender and see what they say.
WHOLESALE MORTGAGE BROKERS
Then there are wholesale mortgage brokers who work as middlemen between the banks / investors and borrowers on the wholesale level to secure financing for homeowners. That’s us. America’s largest wholesale mortgage broker. With us, you have access to over 90 different lenders / investors which we shop for you. Let us find the best rate / loan combination for you and your particular situation, so you don’t have to spend all your time calling around trying to get “real” quotes from different banks. This is why people refer to Derek as “The Human Lending Tree”.
We also have access to the wholesale side of many of the above mentioned retail lenders and mortgage bankers (which means wholesale rates with us). It goes back to retail versus wholesale. Also, as wholesale lenders, we DO have to disclose our commission to you so you know that if there is any extra money at all, it goes straight back to you, our client.
We are also able, many times, to provide you with MASSIVE lender credits towards closing costs for many loan programs (FHA and VA), unlike banks and mortgage bankers / direct lenders. Ask us about this.
TIP - Not all mortgage brokers are created equal, either. Most mortgage brokers are small mom & pop shops who only do a couple loans a month, so they have to make more money on each deal. Because we do so many loans, we don’t make as much per deal and make it up on volume and referrals. So, just as with the previous examples, if you are working with a mortgage loan officer currently or have been referred to one, get a quote, but then have Derek give you a quote to see how it compares.