Many Americans, especially millennials, are increasingly wanting to shop for the mortgages they are seeking.  This is somewhat driven by technology and the increased ease of being able to canvass lots of options in real time.  It is also driven in part by market forces, which I will explain later in this article.

Why go into your local bank's office when you can call a competent, licensed mortgage broker and have the broker survey the market and research the right mortgage option for you?  Often times when you go to your local bank, you are restricted by the products they offer.  In addition, many people do not realize that rates and terms can vary significantly across lending institutions so the rate you are seeing at your local bank may not be competitive at all.  A bank's higher rate for a specific loan product might just mean that that particular bank is overweight the loan product you want or that it really does not want to take on additional exposure in that loan product.  

In the above example a broker could first search for lenders that want to make loans in the product you desire and then give you a menu of options to pick from.  If in the rare case your local bank offers you an attractive deal, you could simply go with your local bank and not go with the broker.  Brokers do not get paid anything unless you close a loan with them so there is no obligation to proceed with the broker if they research options for you upfront.  

Some people also worry about working with brokers in general.  Thanks to the Great Financial Recession and thanks to Uncle Sam, gone are the days of rampant unethical broker behavior.  Because of what happened with the subprime crisis, tons of new regulations were passed to protect the consumer.  This is great for all, as everything has become more transparent.  Broker fees are fully disclosed and capped, and brokers are incentivized to do the right thing with the consumer in mind.       

As for the market forces mentioned earlier, many people do not realize that wholesale lenders have grown significantly and are taking share from retail lenders.  It is estimated that they now have a 25% share of all residential mortgage originations in the US.  What are wholesale lenders you may ask?  They are basically those lenders who deal not with borrowers direct but rather with brokers, who then interact directly with the borrowers.  So a local bank is considered a retail lender, not a wholesale lender.  What has happened lately is often not discussed or even known unless you're in the mortgage industry.  Many of the wholesale lenders have gone public, and there is now intense competition among them to deliver growth.  To gain share many are reducing rates, benefiting the consumer/prospective borrower.  These more attractive loan terms are not going unnoticed, and more and more people every day are seeing the value in shopping for loans with brokers.  Borrowers cannot access these attractive wholesale loan deals offered by lenders without going through brokers.  It is not surprising that with wholesale lenders gaining share, retail lenders are starting to feel the pain.  Wells Fargo, the second-largest mortgage lender in the U.S saw its market share drop by 12.5% in the fourth quarter of 2020.  Nevertheless, some retail lenders might still offer the right solution for borrowers.  Brokers are able to work with wholesale and retail lenders and can determine the optimal route to go given the borrower's situation and constraints. 

In conclusion, there is no harm in speaking with a broker about your particular situation.  In fact it is likely that the financial terms you can achieve with a broker are likely better than what you can achieve with a local bank or other retail lender, whether due to focused technology or market forces.  Please don't hesitate to contact Herold Financial, LLC for a FREE Consultation (drew@heroldfinancial.com or by (479) 282-1827).