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Shopping for Mortgages

By Randy L. Prothero

Real Estate Agent with eXp Realty 2021016812

June 01, 2008 02:56 PM

I thought I revisit this issue again, since it comes up so often in the course of doing business.

I frequently get asked about using a funding lender vs. a mortgage broker vs. an online lender.

I have some very strong opinions on the topic and have never been shy about it and why I have the opinions I have.

Randy's Rules:

I strongly recommend using a funding lender whenever possible.
I strongly recommend in using a local lender.
I strongly recommend using an experienced agent and not a rookie.

I know there are some really great mortgage brokers out there. I am sure there are some really good online lenders and out of state mortgage folks. There may even be a rookie or two that will do a better than average job. My experience has been that they are the exception to the rule.

Almost every bad mortgage story I have, involves a broker or an out of state lender.

We are speaking about the most expensive purchase they may ever make. It is not amateur night.

A mortgage broker:

A pre-approval is only an opinion from someone other than the folks who will ultimately approve they loan.
In most cases they charge higher fees than the banks
Their agents are paid a commission based on how much they can run up your bill.
Many times the Good Faith Estimate and the actual loan do not resemble each other.
If there is a problem with the loan, you may not find out until very late in the process.

Out of State Lender:

They do not know our contracts.
They are unfamiliar with our laws and customs.
They will not be there at the signing table to explain what you are signing.
They will also never see you again. Not much accountability here.

When using a local funding lender:

You are dealing with the folks who will be approving the loan.
You have an loan officer who knows the laws, customs and contracts.
You have the ability to see them face to face and have them present at the closing table.
They do business with your REALTOR® and have a vested interest in keeping both you and your agent happy.
They tend to charge lower fees than most brokers.
The loan letter they submit is much higher respected by sellers and their agent.
If there is a problem they can have the underwriter review it up front. This will give you time to address concerns and save time and energy if they can not do the loan.

My experience has been the folks that quote the lowest rate rarely come in with it at closing. The local funding lenders are all extremely competitive. The biggest difference is the loan officer. Great loan officers find you the best deals and provide the best service.

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Dave Woodson

Dave Woodson - Chesterton, IN

Not the Average Agent

hey, Randy, I resemble those remarks. thanks for sharing. I hope to visit your state soon.

Jun 01, 2008 03:02 PM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Dave - When you come to Hawaii look me up.

Jun 01, 2008 03:03 PM

Jason Sardi

Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC

Your Agent for Life

Randy - Time for bed, but interesting. Some points I agree with, some I don't. I'll be back.

Jun 01, 2008 03:09 PM

Bryan Flynn

Regency Mortgage Corporation - Worcester, MA

Central Mass and Worcester Mortgages

well said and I agree.... I just switched from the broker world to a national lender.

Jun 01, 2008 03:13 PM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Jason - One thing for sure, it is my opinion. :)

Bryan - Your company is one the of the lenders I work with and have had nothing but good experiences with them locally.

Jun 01, 2008 03:47 PM

Celeste "SALLY" Cheeseman

Liberty Homes - Mililani, HI

(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

Well, you know me....as long as they're good....and i've been working a lot with one particular mortgage broker for almost five years. We work very well together....and he always gets the job done.

Jun 01, 2008 05:44 PM

Charlottesville Solutions

Charlottesville Solutions - Charlottesville, VA

The one thing that really hurts a closing for my clients is an out of state lender. You covered it very well! It seems we never can close on time with a lender from out of the area...

Jun 01, 2008 11:15 PM

Gary L. Waters Broker Associate, Bucci Realty

Bucci Realty, Inc. - Melbourne, FL

Eighteen Years Experience in Brevard County

Some really valid points - well said.

Jun 02, 2008 12:28 AM

Jason Sardi

Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC

Your Agent for Life

Randy - Ok, I'm back:-) Since I'm a Mortgage Broker, I'll stick to my thoughts on your thoughts about dealing with such. If I hit on the rest, well, we could be here all day long.

A mortgage broker:

A pre-approval is only an opinion from someone other than the folks who will ultimately approve they loan. (Unfortunately, you are right here. Pre-approvals were based on a 1003 Application & Credit a lot of times without any supporting documenation from the client. I've found this be the case on several occassions. Personally, if I don't have supporting documentation, all the client has is a Pre-Qualification ... which holds little merit.)
In most cases they charge higher fees than the banks (Disagree here. Rather than go searching for stats on this ... I'll go on experience. That's probably what you are going on as well. If priced fairly & competitively, I can count the number of times I've been beaten by a bank (legitly) on one hand. Of course, there are exceptions but I've found that to be the general rule. I can typically close with a better rate too.)
Their agents are paid a commission based on how much they can run up your bill. (Unfair assessment on the motivation of the Mortgage Broker. There are bad and desparate folks, in any commission based occupation. Again, you may be going off your experiences but I'd hate to make a similiar generalization of about Listing Realtors who are putting somebody's home on the market.)
Many times the Good Faith Estimate and the actual loan do not resemble each other. (I've seen this across the board, no matter if it's a Mortgage Bank, Direct Lender, Broker, Savings & Loan Company, etc.)
If there is a problem with the loan, you may not find out until very late in the process. (I've seen this happen and experienced it. If the lender changes their mind or there is a 'burp' in underwriting ... it could come last minute, which I loathe. That said, on the other side if something goes wrong with the loan last minute at other entities ... it may just get turned down. Where, in our case, we at least have the availability to place it elsewhere.)

All that said, I would eventually like a line of credit in special cases and situations, to simply enhance our ability to service folks. I'd never want to lose the availability of options, but it would be nice to be able to fund loans here and there as needed. I appreciate your perspective Randy, and I can see where you are coming from with a lot of this. Hopefully, this stuff continues to change to better service and educate people. If I was in Hawaii, I'd work like the dickens to try not only to earn your business ... but change your outlook on Mortgage Brokers.

Jun 02, 2008 03:25 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Randy as you know I work for a direct lender, and the easyest compition that I have out there are Mortgage Brokers especially if they are out of state, or better yet Internet Lenders. EVERY Good Faith Estimate that I have seen from them, when I put it up against mine, they are ALWAYS a lot higher, I have yet to find one that wasn't. As a direct lender I have easy access to everyone that will be involved with the loan from the time it comes in the door until it Closes. If my Underwriter has a question, or I have a question, we talk to each other face to face with documents in hand, no guess work as to what we are looking at or talking about. The same thing throughout the process, and no last minute surprises.

Jun 02, 2008 08:46 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

David M. - That is a common theme.

Sally - As long as he gets the job done. I prefer the lender who does the funding for the reasons I listed and a few more I can think of.

Charles - I absolutely hate when I get a contract with an out of state lender involved. It is rarely good.

Jun 02, 2008 11:21 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Gary W. - Thank you

Jun 02, 2008 11:33 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Jason - I knew you would be back. Let me try to respond to your points as best as I can from my experience here in Hawaii. It may be different in other markets, but from the responses I have gotten here and on other posts, I think it is the same most everywhere.

I agree a pre-qual is next to worthless.
I have only seen a tiny minority of the transactions with mortgage brokers where they charged the same fees as the banks. None that charged less.
You are right, I am going off my experience and in my experience I consistently see a pattern of behavior from brokers, where they sell products good for them and not for the clients.
The GFE from the primary lenders I work with, always resemble the actual loan except in the case where the buyers credit worthiness changed. Things like buying a new truck or quiting their job. I can give several horror stories of bait and switches from brokers and out of state lenders.
The statement the broker has the ability to go somewhere else. The loan officer at the funding lenders I work with have the same ability, with normally lower fees. The difference is they take it to the underwriter up front and red flag any potential problems up front. That has not been my experience with brokers both both locally and from out of state.
If you moved to Hawaii; being a quality loan officer I would encourage you to hang your shingle with a funding lender.

Thank you for your thoughtful responses to my post. I am sure you are very good at what you do. With the experiences I and my clients have had; it is a simple choice. Not one customer complaint in the last 5 years towards the loan officers I recommend who are with local funding lenders. More than I can count with out of state lenders and brokers. it is not even a close call in my business.

I know many real good mortgage brokers in my area. I can not with a clear conscience recommend them to my clients.

Jun 02, 2008 11:42 AM

Kathy McGraw

CELLing Realty - White Water, CA

Riverside County CA Real Estate

Randy- With so many people looking closer at lending today this post brought some good discussions out. Here in my area the local bank doesn't seem to give loans any better, or cheaper than the Mortgage Brokers. I am a firm advocate of knowing who you work with, and having a good line of communication open. That being said, all of us usually recommend on our "own" experiences ........

Jun 03, 2008 05:18 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Kathy - So true about recommending on our own experiences.

Several of the top producers in my area require a loan letter from the funding lender when the buyers are using a broker. We all have seen so many bogus loan letters.

Jun 03, 2008 05:52 AM

Sharon Simms

Coastal Properties Group International - Christie's International - Saint Petersburg, FL

St. Petersburg FL - CRS CIPS CLHMS RSPS

Randy - so often lenders will call us and say "Try us out." Sorry - I don't use my clients as guinea pigs. I'll often suggest that they send us a pre-approved buyer that we can find a property for and accordingly "try them out". It's a different situation, of course, when you've developed a trust, virtual or local - I'm talking about cold calls.

Jun 03, 2008 09:36 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Sharon - I am with you, my clients are not guinea pigs.

Jun 03, 2008 10:57 AM

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