Wholesale vs Retail Lenders: Who Wins?
At Better Home Financial, we pride ourselves on being the San Dimas area's mortgage broker that not only manages to give our clients personalized, friendly service, but also the lowest possible rates. Compare us to the big banks, and there’s really no competition.
On the service side, it's easy for people to understand how a small business offers such an advantage over a large bank or credit union. Clients can simply walk in, talk to us, see the familiar faces of our friendly team, and leave with the confidence that we are providing them with the right mortgage solution for them.
The question many of my friends have, however, is how exactly do we provide lower rates compared to other mortgage brokers, big banks, and credit unions? Well, it comes down to a few factors. (See also: Top 5 Factors That Determine Your Interest Rate)
The first is pretty simple. As a small business whose focus is solely on providing mortgage brokerage services, we’re able to be far more streamlined and allocate all our resources towards helping our clients who need those services.
We don’t operate as a bank or as an actual money lender in any capacity, so we don’t have all the costs associated with managing those services, nor are we bogged down with as many costly regulatory restrictions that banks and lenders have. Being more midstream in the mortgage process allows us exist in a space where we can keep our overhead lower and help people face to face!
For big banks, or retail lenders, they have massive amounts of overhead to cover, and not to mention shareholders to please. This financial burden and investor pressures gets rolled in to their interest rates, but if you’re thinking it’s only a marginal difference, think again. Retail lenders rates can be anywhere between 1.5 to 2 times the rate Better Home Financial can offer. We blow retail lenders out of the water, virtually every time. Unfortunately this is isn’t exactly common knowledge, so if you’re reading this you know someone buying a home for the first time, or refinancing, share this article or let them know! (See also: Is a Mortgage Refinance Right for You?)
Since mortgage brokers don't operate as an actual bank, we work with wholesale lenders to provide our clients with loans. These are companies that pool together investor money that has a lower required rate of return on their money than the big banks have. A required rate of return is simply the % amount of money an investor wants in return for their investment. Since these wholesale lending companies tend to have money from investors just looking for a safe investment with a decent return, they don’t charge the high interest rates that retail lenders do. But which lender is best for your particular situation? That's where our 30 years of experience comes in to find that perfect fit.
You see, even with the inherent advantage of working with wholesale lenders, not all mortgage brokers are created equal. I should also mention that for some mortgage brokers, finding you the best mortgage solution at the lowest rate is not always in their best interest. By offering you a mortgage that's even 0.5% more what you actually could've qualified for, they can potentially make hundreds of dollars more at your expense. The worst part is that most people aren't financially educated, and don't have the wherewithal to ask the right questions to avoid this. At Better Home Financial, we are always open and honest about your loan options, and we strive to educate our clients so they know they're getting a fair deal.
Also, there are hundreds of options when it comes to working with wholesale lenders, all of which have different qualifications for their loans and different rates for the different circumstances. This is why our unrivaled amount of experience of the wholesale lending business is such an advantage for our customers.
We have long and strong relationships with many lenders, and we only choose the ones that have been vetted, ethical, honest, and proven to be the best value for our clients. Not only have we hand selected our lenders, but we have unparalleled knowledge of how small differences in our client’s mortgage scenarios affects specific lender’s interest rates. In addition, we charge our lenders the industry lowest in service fees, which in turn makes it cheaper for the lender to do business with us.
As a result? These savings end up being rolled into our customer’s rates, and becomes one of the biggest reasons Better Home Financial provides the lowest interest rates. It’s plain and simple, we don’t take as much home as our competitors. And we’re okay with that, because that’s what good honest business is all about. In these ways, we provide better service at the lowest possible interest rates for new mortgages or refinances.
Not all mortgage lenders are created equal. You want a full service broker that consistently delivers the absolute best experience from the first step of the mortgage process to the last. Trust your home buying or refinance with Better Home Financial, and have the confidence you are paying the least amount for your loan, receiving the best financial advice from our CFO Mike Wallace, CPA, and don’t stress whether or not you may be wasting thousands of dollars on your loan someone else.