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Mortgage Brokers Aren't More Expensive Than Mortgage Bankers.

At least, they shouldn't be. There's a common misperception that mortgage brokers are nothing more than middlemen who get paid for finding a mortgage loan that the consumer couldn't find on his or her own. Because they're middlemen, the argument goes, they mark the loan up higher than retail. But that's simply not the case.

Yes, there certainly are times when brokers charge excessive fees, origination charges, and points, but that's abusive and probably predatory. Predatory lending practices will be revealed in Chapter 6.

Brokers get their mortgage programs at rates below the market, add their margin to the product, then hope to price that product at a competitive enough rate to originate the loan.

Your Mortgage Broker Doesn't Use 1 00 Lenders.

So how many wholesale lenders do mortgage brokers actually deal with? If you believe their advertisements or read the material in one of their brochures, they're set up with hundreds, and I mean hundreds, of lenders. You've seen the advertisements.

"We have access to over 100 national banks and mortgage companies ... let us find the right program for you!"

But do you think your loan officer will actually go through literally thousands of interest rates just to find you the best deal? Of course not; if he did, he'd be spending all his time looking at rate sheets and wouldn't have time to take care of his customers.

Mortgage brokers tout how many lenders they're signed up with, and a broker might at one time have been signed up with 100 different mortgage lenders, or more, but he won't use them all. He'll probably use only a handful.

When I started out in the mortgage business as a mortgage broker, I spent tons of time going through rate sheets. After a few weeks of this, I finally began to notice something. I probably spent a total of 100 + hours looking at rate sheets when I first got into the business, only to discover that. . . everybody's rates are the same!

So what did I do? Like every other mortgage broker you'll ever meet who's been in the business for very long, I quit going through those rate sheets—at least, all 100 of them. Instead, I started just looking at the ones from the companies that I did the most business with. And that's what your mortgage broker probably does. There's no need to waste so much time; all the loan officer needs to do is pick up the rate sheets from her favorite lenders, compare them, and move on.

It's those lenders that she'll compare to find that extra 1/8 percent that she hopes to either quote to you to get your deal or use to make a little extra money from the deal.

"We're signed up with 100 lenders" is nothing more than a marketing pitch. A broker may in fact be signed up with that many, but there's really no way for you to go through your mortgage broker's wholesale lender file cabinet and count them. You just have to have a level of trust in this instance. And if the broker does have 100 or more lenders, she's probably not going to look at all of them every day.

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