Is A Bank a Better Choice Than a Mortgage Broker for a Home Loan?

In this edition of Arizona Mortgage News with local expert Mike Goblet of United Mortgage and Financial Group, we’re going to talk a little bit about the difference between a mortgage broker and a bank. Which one is a better option for when you’re out there looking for a mortgage?

The basic difference between a mortgage bank and what is a mortgage broker is that a mortgage bank closes your home loan in their own name, with their own funds, with a line of credit that they already have established. A mortgage broker, on the other hand, does not close the loan in their own name.  Mortgage brokers use funds from a wholesale lender that they’ve chosen, and close in the name of that lender or that bank.

Learn more about the differences between these service providers in this informative video.

Matt O’Brien:  We’re here with another segment of Arizona Mortgage News with our local expert Mike Goblet of United Mortgage and Financial Group. Today, we’re going to talk a little bit about the difference between a mortgage broker and a bank. Which one is a better option for when you’re out there looking for a mortgage?

Mike Goblet:  Hi, Matt. How are you?

Matt:  I’m fantastic. How about yourself?

Mike:  Great. Thank you. I think this is a good topic because a lot of people don’t understand the differences between banks and brokers and where the advantage might lie. It’s something I thought would be a good thing to talk about.

Matt:  Excellent.

Mike:  Let me start out with actually what is a mortgage bank and what is a mortgage broker? Let me take you to the definition first. A mortgage bank simply means they close your home loan in their own name, with their own funds, with a line of credit or whatever, that they already have established. A mortgage broker does not close the loan in their own name.

They use funds from a wholesale lender that they’ve chosen. They close in the name of that lender or that bank, as it were. By definition, that’s the difference between a mortgage broker and a mortgage bank.

Matt:  Makes sense.

Mike:  That often leads to the assumption that, “Wait a minute. It sounds like a mortgage broker is simply a middleman, and adds more to the cost of the loan rather than expediting it or saving money.” I think a lot of people come up with that conclusion, and it really is erroneous. It just really is different.

I think maybe the best example that people will understand, is the example between an independent insurance agent versus somebody who works directly for Allstate or GEICO, or whoever it is, Progressive. When you’re locked into being with that company, you’re locked into those guidelines and you have no options.

Many people, who have looked at independent insurance agents, find they may even represent some of those lines. They also represent other lines that don’t have their own retail sales organization and, actually, thus, are able to offer a wider variety and diversification of products than many of the straight‑line companies are able to do through their retail branch. Does that make sense?

Matt:  That makes sense. What I think you’re getting to is that if you’re a bank, I think we talked about this before, when you get an appraisal on your house, that appraisal cannot be assigned to any other financial institution. Is that correct?

Mike:  Well, that’s actually changing. Many lenders are now allowing a transfer of appraisal. That used to be the case, but those guidelines are getting more flexible. Particularly in the wholesale marketplace, allowing the transfer of appraisals.

Matt:  Which lends itself more to working with a mortgage broker? I know that not every bank has the best most competitive rates.

Mike:  Here’s the real key. We all work off of what are called, wholesale rate sheets. Even a Wells Fargo, B of A has their wholesale rate sheet that they now give to their retail establishment. What we have is other wholesale lenders who actually end up getting more aggressive in pricing in order to attract a business, than just a bank that actually has a lot of different avenues and places of revenue.

We’ve often find that most banks, like a Wells Fargo, are less aggressive. They don’t feel they need to be because they have other streams of revenue. Candidly, in the past we used to use Wells Fargo, B of A, Countrywide, and be a broker for them, too. Seldom, did we ever get beat by their retail branches. We just have a different set of overhead. We’re working off of the same retail price sheet that the bank was.

Matt:  Interesting. I can think of one advantage right off the bat between a mortgage broker and a bank. I know where you are, and I can find you. Getting a hold of a bank and those financial institutions, you never know if you can even get through the 800 line.

Mike:  That is part of it, without a doubt. Banks, you get less customer service. They are less interested in the mortgage than, for instance, a mortgage broker who that’s your whole revenue of income. Customer service, and doing that loan, is all that we are about. Where a bank has other interests, and even their people, they’re just not as intense to get the loan done.

Matt:  I agree with that.

Mike:  Let’s look at a couple of facts and myths about that. A lot of people think banks offer the same or better products. That really is a myth. What happens when you have a bank is, again, they are locked in to whatever the guidelines are for that bank.

I’ll give you an example of a client who just came to me and I’m working with. She was turned down by Wells Fargo because in her history earlier in the year, because of something she didn’t create, but she had two non‑sufficient funds in her checking account that turned out to be overdrafts.

Wells Fargo said, “Nope. We can’t do it.” They were already towards the closing and the bank said, “We can’t do it.” Well, I’ve got lenders that say, “First of all, if they didn’t happen in the last three months, I don’t care. Let alone whether they happened.” Again, it allows me the flexibility to look at different lenders with different guidelines. All the lenders have somewhat different guidelines and overlays.

Matt:  Makes sense.

Mike:  The other is just as we talked about. Do banks have better pricing? For the most part, they usually don’t over wholesale lenders whose focus is getting mortgage business. Many of them don’t have retail branches, or it’s not the predominance of their business, so they get more aggressive in their pricing versus banks. I think that’s an advantage of a mortgage broker.

Matt:  Absolutely. Plus, we do know that when you do have questions in that whole process, I think that the experience of a one‑on‑one versus being a part of institution that is really more looking at sometimes numbers and getting you into a program that may be hot for that month, versus really what is the most important to your needs.

Mike:  This is maybe the most important fact or misunderstanding, that banks will disclose all the information about that loan to you. The fact is they do not. Even by law now, mortgage brokers must disclose all of the money involved in that, including the backside of the loan known as yield spread, the rebate incentive associated with every price and every rate.

A bank will not disclose to you, by law they do not have to, how much money they’re making at the different rate. Whether they show an origination fee or not, whether it is the full amount they’re going to be making on the loan, they do not disclose it to you.

A mortgage broker discloses all of the money. In fact, I tell my clients, “I’ll show you all the rates and the different incentives. Nothing changes on my part. You choose whatever rate you want. It doesn’t change anything I’m doing.” I think that’s an important change.

Matt:  It’s a huge change. It’s good news. I know it must’ve been two or three months ago that you specifically said if you go through the appraisal process, it’s specific and tied to one financial institution. That really opens up the door for mortgage brokers.

Mike:  The simple answer. Why choose a mortgage broker over a banker? We have more options to choose from and can get the client into the best program that meets their individual need. Transparency of all the information will be a hundred percent with a mortgage broker and not necessarily true at all with a bank.

Finally, we work harder because it’s our only source of revenue, rather than having checking accounts and other things that we’re making money on. I think you’re going to find, in most cases, I seldom get beat by a bank because we have less overhead and much more incentive in customer service to make the loan happen.

Matt:  Makes sense. Mike, what is the best way to get a hold of you?

Mike:  Matt, people call our office at 480‑503‑3533 or directly to my cell phone at 480‑220‑2329. My email address is mike.goblet at, our company initials, U‑M‑F‑G‑I‑N‑C, dot com, mike.goblet@umfginc.com.

Matt:  Very, nice. Thanks for sharing your wisdom with us once again. Please remember to subscribe to our YouTube channel, and certainly if you have questions, Mike is here to help you.

Mike:  I look forward to talking to you in the future. Have a great week, and I hope to see all of you again. Thank you.

Matt:  Thanks, Mike.

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