Why are mortgage brokers gaining market share steadily each quarter? Because brokers provide far superior value to homebuyers than traditional mortgage lenders.
A traditional mortgage loan officer is a bit like a car salesman working for a particular dealership. A car salesman is paid to convince car buyers to buy a car from their employer at whatever price that dealer must charge in order to cover costs and generate a profit. And costs can vary tremendously between dealers depending on the scale of their operation, its location, and its operating expenses. Likewise, a traditional loan officer works for one lender and that lender’s margins are whatever they require to cover their costs and generate a profit. Required margins vary significantly by lender and the job of a traditional loan officer is to convince borrowers to ignore those differences.
Alternatively, a broker works for the borrower as their personal agent and not for any particular lender. That makes them more like a car buying service that provides unbiased advice and finds car buyers the best possible price among all dealers within a wide geographic radius. A mortgage broker is a home buyer’s advisor and is free to find his/her client the best value available for their mortgage among a wide range of “wholesale” lenders. And the reason brokers are gaining market share is because those wholesale lenders are extremely efficient and have much lower operating costs which create enormous savings for consumers.
The interest rate difference between the average rate available to borrowers from traditional lenders and the average rate available to the same borrowers using brokers is up to .50%. That one-half of one percent in rate equates to as much as $25,000 in savings over the life of a $260,000 mortgage! It’s no wonder that savvy borrowers are flocking to brokers. And the rate advantage that brokers provide will become even more important to hopeful homeowners as rising rates make ownership less affordable.
Traditional lenders will of course argue that they deserve their margins because they provide superior “service.” But the fact is that today’s brokers – along with their wholesale lending partners – provide better and more consistent service than can be found at any retail lender. The combination of local, knowledgeable, and trustworthy advice from a broker along with the fast and consistent underwriting of today’s nationwide wholesale lenders creates best-in-class advice, rates, response times, and peace of mind for borrowers.
