Why use Banks?
Once you've read the preceeding page, you begin to realize that Mortgage lending companies have a distinct advantage over Banks in the products that are offered. Mortgage lenders have a much broader range of programs and can therefore serve a much larger and diverse market than traditional banks. And in a lot of cases, mortgage lenders that specialize in 'A' paper loans offer lower rates than local banks for similar programs.
So why does everyone associate getting a mortgage with going to the local bank? Why don't more people, especially those that don't fit the cookie cutter mold, utilize mortgage lenders? The answer is that banks have a better distribution system. Banks, as an industry, have probably one of the best distribution systems working today. Almost everyone is already using their services. Its only natural for people to want to do mortgage busines with their bankers.
In the business world, a great distribution system beats a great product every time. Let's use a well known example to illustrate this. Can you make a better hamburger than McDonald's? Of course. Can you consistently deliver that better hamburger to thousands, perhaps millions of customers on a daily basis? Probably not. McDonald's ability to continually feed millions of people makes the tastiness of their hamburgers almost irrelevant. Its the same with local banks in the mortgage industry. Their well designed distribution system compensates for their limited program offering.
Brokers and Bankers
This is where mortgage brokers come into the picture. Mortgage brokers have access to many different mortgage lenders. Mortgage lenders depend on their network of brokers to help distribute their mortgage products. The many mortgage brokerage companies in business today are the distribution system for mortgage lenders.
There are some key distinctions between a mortgage banker and a mortgage broker. Now, I am not saying one is better than the other. They both have advantages. I am saying there are some fundamental differences between mortgage brokers and mortgage bankers that determine how they service the local mortgage market.
For instance, a broker does not work for the company lending the money. A broker works for you much as an attorney or accountant would. In effect, a mortgage broker represents you, his or her client, to the mortgage lending comapnies. A mortgage banker, on the other hand, works for the company lending the money and is that company's representative to you. Now, make sure you understand that last statement. Since a broker works for you, its their job to represent you to the mortgage lenders in the best possible light. A bankers job is to represent his or her company to you in the best possible light.
Again, I am not saying one or the other is inherently better. However, I am saying that one could could be better for you, in your particular situation. Some Mortgage companies, like ours, are licensed as both a mortgage banker and mortgage broker
If you have strong credit, a stable employment history and have a good debt to income ratio, a mortgage banker is probably an excellent choice for you. However, if you don't have all the above criteria, you probably need a mortgage broker.
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