Bank Lender or Mortgage Broker

[Harrison Chow]

Hi Guys!

My first post here... I'm at the beginning stage of BRRRR process, trying to assemble a team of experts and one being the lender. Do you guys prefer working with one or two lenders or do you have a mortgage broker that hunt the best deal for you? What are the pros and cons for each?

I know there are multiple options to get the cash out refi such as traditional banks (up to 10 loans) and portfolio lenders where the sky is the limit - but with higher interest rate. That's what read in David Greene's BRRRR. I don't recall him mentioning mortgage broker... please share your wisdom with this novice here!

Thanks!!

Harrison

[Chris Mason]

Originally posted by @Chris Mason:

Originally posted by @Harrison Chow:

Hi Guys!

My first post here... I'm at the beginning stage of BRRRR process, trying to assemble a team of experts and one being the lender. Do you guys prefer working with one or two lenders or do you have a mortgage broker that hunt the best deal for you? What are the pros and cons for each?

I know there are multiple options to get the cash out refi such as traditional banks (up to 10 loans) and portfolio lenders where the sky is the limit - but with higher interest rate. That's what read in David Greene's BRRRR. I don't recall him mentioning mortgage broker... please share your wisdom with this novice here!

Thanks!!

Harrison

 There's no point in putting a specific recommendation either way in a book, since it's market dependent, as well as time. 

Right now, as of 2019, I fairly recently made the switch from banker to broker. I was mostly chasing rate. There are also operational differences -- the notion that one lender can be all things to all consumers and loan officers, in the current over-regulated & competitive "margin compression" environment, doesn't really play out. 

Sometimes you need speed. Sometimes you just need to chase dat rate (my #1 motive for switching). Sometimes you need really smart underwriting. Just like you can't create a character in an RPG or video game that is 10/10 for all skills, you can't make a mortgage bank that is 10/10 across the board. As a broker, rather than trying to convince people that my employer is 10/10 for all, I can take in the totality of the scenario (21 day loan contingency, or 7 day loan contingency? Spazzy FTHB or seasoned investor?) and find the lender with the right "skill point" allocation.

As of 2019 I feel that the wholesale mortgage broker channel is a better overall value package than retail mortgage banking. But times change. Maybe in 2023 things will change again, and I'll switch teams, and be singing to a different tune at that point. I'm not ideological about it, and overall have spent the majority of my years in the mortgage biz as a banker.

 Also, quick note. I'm only licensed in California and haven't / don't care to validate this, but people credible to me have claimed that wholesale lenders (who we work through as mortgage brokers) bump their rates significantly in markets where the real estate is cheap. So if you are in Nebraska rather than Oakland or Sonoma, the retail banking model might be better on rate. I honestly wouldn't know. But the rest of the stuff about "skill point allocation" remains true - bankers ubiquitously have "captive vendor" aka "do not compete" arrangements with their employers, so they aren't allowed to broker or send the business elsewhere even if they want to, and even if they are licensed, without (rarely granted) employer approval.