Should I Use A Mortgage Lender Or A Bank?

Are you thinking about getting a mortgage, and you need to figure out, are you gonna get your mortgage with a big bank, or are you going to go to a direct mortgage lender?

Well, in this video, I'm gonna answer the question that we get all the time, which one's better, what's the difference, and what do we recommend, and why? So when you think of banks, you probably think about the big names that you hear all the time, Bank of America, Chase, Wells Fargo, companies like that, and there are a lot of other smaller banks as well. But the point remains, the constant over all of these companies, the mortgage division in these companies really is not the profit driver for the company. These companies are making billions and billions of dollars a year. But the mortgage division, on average, makes up about 3% of these companies' profits. So when you think about that, it's such a small percentage of their profit, they normally aren't always putting their best and their brightest people into the mortgage banking division.

A lot of times, the best and brightest go to investment banking divisions and other things like that that are making the company a lot more money. Banks make the bulk of their money doing car loans, auto loans, commercial real estate loans, student loans, credit cards, things like that, that's where they're making more of their money. The reason they're really doing mortgages is because the worst thing for a bank would be for you to walk into one of their competitors because, you know, the bank that you go to doesn't offer mortgages. You get your mortgage at the competitor's bank, and then they try to upsell you, and you end up moving all of your money, your assets, whatever it is from your old bank to a new one, then they've lost you as a customer, likely forever. So they all do mortgages to make sure you don't move assets from one place to another, but it's really not the bread and butter of their business. It's really not even what they want to be doing.

These banks, because they don't really want to be doing these mortgages, they tend to be very conservative as far as their appraisals. So you may have a deal, and I've had it happen all the time, where everyone's in agreement that a home is worth, let's say, $500,000. The realtors, that's the price they're all suggesting, the seller and buyer both know that it's a very fair price, everyone's in agreement, and then the appraiser comes along, and these appraisers have to be very conservative because that's what the banks are looking for. So the appraisal comes in at $480, and it blows the deal. So we've seen that happen all the time.

The other negative that we see with these big banks is because, you know, the mortgage banking division isn't necessarily the biggest part of their company, they don't hire enough people for the volume that they have. And, the people that they do hire, are a little slow, probably not the best that they could be at their job, and you know, maybe they're in a complete other state. So we see a lot of some of these big banks, you know, we're here in Florida, and the underwriters and the processors and all the people who are really working on the file are over in California. Well, that's obviously a three hour delay, so when you have an issue, you know, on the day of closing, or you need documents, you're waiting a very long time a lot of times for these people to give you documents. So, it's not always the best way. It's definitely not a bad way if you wanna go to a bank and get a mortgage, but in our opinion, there are better companies and better options for you to be getting your mortgage.

Now a direct lender, or a mortgage banking company, what they do, they only do mortgages. So they're not there to cross-sell you on moving, you know, retirement accounts to their company. All they do is mortgages, so they have to be really good at what they do. Could you imagine a restaurant that only sells hamburgers, but the hamburgers were really bad? They probably wouldn't be in business for very long. So when you go to a direct lender, all they do is mortgages so you know that they're probably, at the very least, well-versed in mortgages, and they should be good at what they do. Now these direct lending companies, in order to attract the best loan officers, they have to have the best staff behind them. So the best underwriters, the best processors, the best people who are behind the scenes who most normal people don't appreciate, but they're a big part in the mortgage process. They tend to hire the best and the brightest of those people because if they had bad back-end processes, they wouldn't get good mortgage originators, they wouldn't do a lot of volume, and they wouldn't be in business. So we tend to see that some of the good mortgage companies have the best processors, the best underwriters, and again, not every mortgage company is created equal. There are some very, very, very good ones, and there are some really, really bad ones. So you still have to make sure you're using the right direct lending mortgage company, but in our experience, we tend to find better results with direct lenders versus the big banks.

Now as far as interest rates go, the interest rate that you get on your mortgage is based on your credit score, your unique profile, you know, how much money your putting down, the type of property you're buying, stuff like that. So whether you go to a bank, or if you go to a direct mortgage lender, give or take a small fraction of a percentage on your interest rate, they should be basically the same because they're going off your credit risk profile to price your loan. So you're not gonna get significant difference in interests rates at a bank versus a direct lender. The only time this may be different is if you have a ton of money sitting in an account with your bank. So if you have 250,000, sometimes I've seen up to $500,000, these banks will say, listen, you are a prime client of ours, we wanna give you a better interest rate, so a slightly lower interest rate. But most of the time, that's when you have a lot of money sitting in those banks. Other than that, they don't really care as much, like we were talking about. So your interest rate should be the same either way.

So that's the difference between banks and direct mortgage lending companies. Our recommendation is to get a good, local direct lender. Someone who, the loan officer is here in the area that you're looking to purchase, their underwriters and their processors are also stationed here in the area that you're looking to purchase. If you need a recommendation for a good lender, reach out to us, it really does make all the difference in the world as far as having a smooth process from start to finish with the lender that you're working with, too. So if you need a recommendation, like I said, feel free to reach out. Otherwise, thank you for tuning in. I'll see you on the next video.

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