I speak with people all day long about home loans and what they want and how to get it for them. Many times there is confusion about how the system works and whether they should go with a big bank, local credit union, loan broker or a mortgage banker. The reality is that there are some clients who could go to any of these and be served well. Other times the client would be wasting their time with any but one of these options and I will try and point out the difference here.
Mortgage Broker - A few years ago, 68% of all loans were brokered and now it is down to about 11% and I think that is sad. It is sad because brokered loans are typically the lowest cost option with the most choices for most consumers. A broker is someone who can shop for the best loan for you at hundreds of different wholesale lenders. Brokers can offer basically any kind of loan program available under the sun and are licensed by the DRE and NMLS.
Mortgage Banker - Similar to a broker, but a banker will lend you their own money and then sell the loan to a larger bank. Most bankers offer conventional loans as well as FHA, VA & USDA and they have broker relationships set up to handle loans they do not do in-house. They typically carry the same licensing as brokers as well but some are licensed by the Dept. of Corporations. This is the channel that many brokers have migrated to over the past few years.
Credit Union - Most Credit Unions that are active in real estate lending will act like a cross between a mortgage banker and a big bank. Most do not handle government loans and they do not broker much if they broker anything at all, they fund and sell conventional loans. What credit unions do better than anyone else is help when people or houses do not fit in the box. They are able to do this with loans they keep in-house. These are known as portfolio loans and they typically carry a higher interest rate and a shorter term like a 5 year fixed rate. If you need this type of loan, it is well worth it and I refer clients to Credit Unions regularly. Credit unions licensing is similar to banks and their loan officers do not typically require any licensing at all.
Big Banks - These are the guys that are typically buying the loans that the rest are funding. There are certain basic rules that are pretty constant for everyone but big banks have overlays to these rules. If you go to one of them and they have a rule that stops you from getting your loan then you picked the wrong one. It is a one shot deal and if they can't help you, then you are done. Typically the big banks are a little more expensive and take more time to get things done but they may have some streamline options on loans they currently service which may make it easier for that client to refinance with them. Banks are licensed and regulated by the federal government and their loan officers need no licensing at all.
I have been doing this for 20 years and for most of that time I have been a banker and broker so I am biased towards that type of lending. In my current capacity, I feel I have the best of all worlds. I am able to handle most loans that come across my desk but I maintain relationships with many of my peers at banks and credit unions and trade referrals with them back and forth. I hope that your travels bring you fortune and happiness and that you find the home of your dreams.
Please email or call me with any real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.
Hans Bruhner is a branch manager for First Priority Financial. Hans is licensed by the CA DRE # 01085398 and NMLS #243454. If you have a question, please contact him at (707) 887-1275 or hans@hansblog.com .
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