As a small company can we compete with the big banks on rates and pricing? The answer is YES, we definitely can. I will outline four reasons why, but first I should explain a little bit of mortgage terminology:
Interest rates can be bought down to a lower rate by paying points. Pricing is the points that you pay to buy an interest rate down. Interest rates can be increased in return for a rebate. Rebate is what we brokers as a reward from lenders if you are paying a higher interest rate. It's also called Yield Spread Premium, YSP. With banks there is a thing called a Service Release Premium, SRP, which is what Fannie Mae or Freddie Mac or some other investor pays a bank when the investor buys the loan in turn from the bank.
1) We can compete because we broker for the big lenders. They give us better wholesale rates than they give to their own branches. Why is that? Because they get more loans from mortgage brokers than they do through their own branches. They don't want to price us out of business. These are some of the lenders for which we broker:
Accredited Home Lenders, Bear Stearns, Chevy Chase Bank, Countrywide, Flagstar, First Bank of Arizona, First Choice Mortgage, First Franklin, First Horizon, First Mutual Savings Bank, First NLC, Freedom Mortgage, Fremont, IndyMac Bank, Lime Financial, Provident, SCME Mortgage Bankers, MortgageIT, Plaza, Washington Federal, Washington Mutual, Wells Fargo, Vertice, Wachovia, World Savings, and many others .
These lenders offer many different kinds of loans at many different rates and prices. If you go to your local banker, you will find that he has a relatively limited choice of loans to offer you. We shop and compare for you and then let you choose.
Take good old Washington Mutual, one of my favorite lenders. Washington Mutual Retail is separate from Washington Mutual Wholesale. They compete with each other. I used to beat a Washington Mutual Retail loan--from one of the branches--with a Washington Mutual loan from its wholesale side. That is because Washington Mutual Wholesale gave me lower rates than it gave Washington Mutual Retail. Wa Mu has recently decided not to work through brokers.
2) We can also save you money by giving you a flat fee quote and through our transparent pricing policy. We tell you the relationship between the interest rate and the amount of rebate we are getting. We point out to you that if you want to pay more closing cost that you can get a lower interest rate. Or that if you plan to keep the loan for a short time, it might make sense to raise the interest rate, produce a big rebate, and use the rebate to give you a low or no closing cost loan. With banks, pricing is not transparent. Banks do not tell you how much Service Release Premium they are making, and so you really do not know how much the bank is making on the loan and whether you are getting a good deal.
3) We might save you money by putting you into the right kind of mortgage, when another lender might put you into the wrong kind of mortgage. Here is an example: Consider the person who plans to sell and move in one year but needs to take cash out of his house temporarily. He goes to the bank and the bank gives him a 30-year fixed loan. A 1-year or 3-year ARM with a much lower rate would have been a better choice, or a 30-year fixed loan with no closing costs.
4) We might save you money by helping you decide whether to pay your closing costs or to go for a no or low closing cost loan. A no closing cost loan sounds like a good thing. But bear in mind that to lower the closing costs, the lender jacks up the interest rate--sometimes an entire point. And you pay that higher rate for the life of the loan.
3) Finally, we can save you money is by delivering you "A Good Deal More," and by that I mean better service. Read the About Us page of this web site. Although I do not practice law anymore and do not represent you as your lawyer, the fact is that I have been a real estate lawyer for 28 years and I was an escrow officer for 20 years. It is easy for me to call on that experience to identify problems and suggest solutions. I do the Quality Control around here.
It is always prudent to get a second quote from another money source. Fax me your good faith estimate and your credit report, and I'll tell you whether you are getting a fair deal.
Call me at 425-774-6611 or 888-999-2022 for further information. Or e-mail me. The fax number is 425-776-8081. Click here to sign up for our e-mail messages, our printed mailings, or to request a call back.
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Copyright © 2008 James Robert Deal. All rights reserved.