Thursday Thoughts

Think you’re getting a good interest rate? Think again

Dana Anghel By January 25th, 2024 January 25th, 2024 No Comments

I’ve seen this post on social media more times than I can count.

“Many thanks to my friends and family. To my past clients who keep coming back to me for their mortgage needs. To my referal partners, for always trusting me with their business. 

Thank you.”

And my response is always the same..

Thank you for what? Oh, that’s right.. for being a sucker. 

I get a little sick to my stomach (and a lot angry) every single time I see a retail lending loan officer bragging about some closing they did. It’s not because they’re bad people, though I fully reserve the right to judge and make assumptions based on their profile picture (!).

It’s because they work for a horrible company, that makes thousands of dollars from selling you higher interest rates. It’s because this horrible company is leveraging this clueless loan officer’s trustworthiness in his or her community to make FAT profits.

Your “friend” in the mortgage industry needs to wake up, and stop selling you the BS they’ve bought into for years. But they won’t do it, not unless you call them out, and force them to pivot. Get a second opinion quote from an independent mortgage broker before 

I’m here to take off your blinders, so you may do the same for the people you care about.

There are two main ways you can get a mortgage loan. 

1. Through a Retail Lender, such as a bank or any other direct lender with an in-house underwriting department

2. Through a Mortgage Broker, which is essentially your loan originator shopping around various wholesale lender pricing before deciding where to send your loan application too. This is what I do.

As a business structure, retail lending is bureaucratic and expensive to run

It involves layers and layers of management, multiple departments such as processing, underwriting, closing, compliance, marketing etc.  All of this costs lots and lots of money, so huge margins of profit are built into the interest rate you’re being offered, and disguised as “service”.  

And do you know what else your interest rate is paying for? 

It’s paying for trips in tropical paradises for “top producers”.

It’s paying for Marketing Service Agreements (MSA) with real estate agents, builders, title companies, and other players in the industry. It’s a grey area that regulators don’t touch nearly often enough, but check out this illegal kickback scheme the Consumer Financial Protection Bureau ( uncovered and made an example of.

In other words, don’t blindly trust your real estate agent when they refer you to their “preferred lender” unless they can back it up with facts other than “I’ve had good experiences, and they close on time”. 

They better close on time, they have one job.. !

But did you get your own mortgage loan through them? Did you shop them around to make sure they’re in line with what other mortgage companies are offering? Did you trust but verify? And who is buying your lunch and your marketing flyers while we’re at it..?

Mortgage brokers on the other hand are independent. They chose which wholesale lenders to work with, and they are responsible for two things:

• Bringing in business, and deciding where to send files depending on scenario

• Originating the actual mortgage loan, and acting as an advocate on behalf of the borrower

Wholesale lenders don’t deal directly with the general public. They need not spend any marketing dollars, outside of reaching out to the local independent mortgage brokers. This is usually achieved by offering really low wholesale interest rates, or attractive unique loan products. 

Wholesale lenders offer the funds, the underwriting and the closing departments, and Mortgage Brokers bring in the borrowers. They get the business in, they make sure the deal closes and the client is happy. All at a lower overall cost, that is a win-win situation for both them and the client. Mortgage Broker often have simple management structures, without bloated layers of management.  Local targeted advertising can be as simple as inexpensive as a website and a Facebook page.

Next time you’re in the market to buy a home or refinance your existing one, ask around. 

Get a quote or two from a local independent mortgage broker in addition to your retail friend’s “trust me” quote.  

Hold that friend, or that real estate agent accountable, and make them explain it to you like you’re 5. 

“Why are you pushing me towards a higher interest rate loan? Why did you not do your due diligence, if you’ve been in the industry for so long?”

I’ve seen both sides of the industry, and I’ve made my choice. 

I said no to the promise of fat sign up bonuses and technology that will do my job if I just sell sell sell.. empty promises and overpriced loans. 

I am my business. And I am not for sale. Neither are my clients. 

They deserve both great service and low interest rates. And it can never be achieved through a flawed, outdated business model like retail lending. 

You don’t need to use me for you mortgage loan, but you do need to get a second opinion before you sign away a good chunk of your income for the next 30 years.  

Email me at [email protected]  for a no obligation, no credit pull detailed quote. Include :

– the type of transaction you’re interested in (refinance, cash-out, or purchase)

– the type of property (condo/single family home/multi unit)

–  your approximate credit score

–  the purchase price or estimated home value

–  the desired loan amount

Easy breezy, and you’ll get an email back from me within 24h. You can also read my pointers on how to shop for the best interest rate, and what questions to ask.

Thank me later. Preferably at the closing table, when we celebrate your savings!