The Mortgage Industry Competition: Bankers vs. Mortgage Brokers

Understanding the mortgage industry competition is a bit more complicated to do. You have to get to know the key players in the industry first before you can understand what it is all about. Fortunately, this article can help you out by simplifying things.

The Root of the Competition

Essentially, the competition exists because mortgage brokers tend to rely on commission-based income. If you are a potential client, you can compare the terms of the loan to others through ads and Internet quotes.

Compare and Contrast

In the past, brokers had no access to wholesale markets and industries. However, brokers had become more competitive because of their wholesale price markets as well as discounts. What does this mean exactly? It means that brokers have an increased chance of having lower rates because of their smaller business model.

Anyone who will get to deal with an individual mortgage broker can get a chance to go away with additional interests in payment unlike if they work with banking institutions down the line.

Another advantage of dealing with the mortgage broker versus a banker is that one will get to have flexibility when it comes to the rates. Mortgage broker can either decrease or increase the rate of their commission depending on what the client can afford.

When you deal with the bank, chances are they would offer you a fixed amount when it comes to the price of the property. This is because the price of the property is tied to the company costs of buying it out. Therefore, they would have to earn their commission based on the original price of the property itself.

Inversely, an advantage of being a banker instead of a broker would be the warehouse credit line, which bankers often use to fund the loan until the property can be sold to the market. This buys some time to broker the property at a more affordable price.

Bankers will then get their commission as soon as they are able to sell the house and pay off the company lender. Mortgage brokers have no way of funding the loan themselves to get the time to sell the property.