Logic dictates that cutting out the “middle man” should yield you a better deal, right? Not in the case of mortgages. Believe it or not, 65% of all Homeowners choose a Mortgage Broker over a Bank or Credit Union. Because many of those Brokerages are small businesses, they can keep their overhead low and effectively lower their profit margins. The result, lower rates and closing costs for consumers. Although lenders quietly solicit mortgage business, it costs them much more to originate a loan as they have to maintain a larger staff to do so. Therefore, they rely on thousands of Mortgage Brokers to find the business. The lender pays the broker a commission for finding, processing, and delivering the loan to them.

 

Like many businesses, Banks have Wholesale Mortgage Departments and Retail Mortgage Departments. Wholesale Mortgage Departments work exclusively with Mortgage Brokers and offer Mortgage Rates .375% to .5% lower than Retail Mortgage Rates. A Mortgage Broker will negotiate a Broker Fee from the Bank. The result is the interest rate a Broker can offer to a consumer which remains a lower rate than the Bank is able to offer directly to you.

 

There's no doubt Banks and Credit Unions have huge expenses. Large Buildings in prime locations, security, advertising, staff costs, etc. By Banks utilizing a Broker to Originate new Mortgages they significantly reduce their costs and the savings is passed to you through a Mortgage Broker.