Colorado Home Mortgage Loan

The biggest decision facing borrowers today is whether to use a Colorado Mortgage Broker or a Colorado Mortgage Banker.  Normally the decision is made by which Colorado Mortgage provider is offering you a better rate or lower fees.  For this article we will make the assumption that both Colorado Mortgage broker and Colorado Mortgage banker can offer the same product.  I will discuss some of the product availability differences later on, but for now let’s compare apples to apples.  This assumes that both Colorado Mortgage Brokers and Colorado Mortgage Bankers offer the same products.  The product we will look at is a standard Conventional Loan at 20% down.  The loan parameters also assume good credit, income, and job stability.

I can go into detail about where the money comes from to help finance these mortgages, but for time purposes lets also assume that Colorado Mortgage Brokers and Colorado Mortgage Bankers all get their source of funds from the same place.  The Mortgage Backed Securities market is the largest market dealing with the investment returns expected from Colorado Mortgage Portfolios.  The money used in these investments comes from investors dealing in mortgage securities right from Wall Street.  So the primary difference on what is charged on a Colorado Mortgage stems from overhead costs and profit expectations from one Colorado Mortgage Bank from another.

Now let’s talk about a Colorado Mortgage Banker.  These Colorado Mortgage Bankers are considered retail outlets for a bigger bank entity.  It is simply one division of the banks total operations.  They borrow the funds from a wholesale lender in order to issue Colorado Mortgage products back to the borrower.  Often times, they Borrower right from their own wholesale divisions.  For example Wells Fargo has a wholesale division that works directly with investors on Wall Street.  This Wholesale division offers Colorado Mortgage funds to its Retail Wells Fargo Branch and their Colorado Mortgage Broker relationships (which I will talk about later).  The Retail Branch has a Colorado Mortgage Banker that offers these products to the public.  Now the Wholesale division offers the Colorado Mortgage Funds at the same rate and cost as they do the Colorado Mortgage Brokers which they have relationships with.  The Retail Branch then is required to put in a profit margin and compensate for overhead.  Overhead expenses are not exclusive to the mortgage part of a retail bank, but instead the entire operations of the Retail Bank.  The minimum break even point for a Colorado Mortgage Banker is much higher then it is for a Colorado Mortgage Broker. 

There are two ways the Colorado Mortgage Banker can make up for the difference in cost.  One way is to charge higher fees (which the rarely do) or they can make up the compensation through a higher rate.  The higher rate allows the Colorado Mortgage Banker additional income reward to them by the Wholesale division.  This compensation difference is known as Yield Spread.  The costs for all Colorado Mortgage products are about the same as it relates to third party fees.  These fees must be paid by the borrower of the Colorado Mortgage Provider.  One way or another they are paid.  So if the third party fees are similar and the wholesale rate is similar then what really sets the Colorado Mortgage Banker apart from the Colorado Mortgage Broker is its overall cost structure and profit expectations.

This brings us to Colorado Mortgage Brokers.  Colorado Mortgage Brokers enter into relationships directly with Wholesale lenders throughout the United States.  Colorado Mortgage Brokers are not limited to the number of relationships they enter into and often find huge benefits by entering into several relationships.  Unlike a Colorado Mortgage Banker, Colorado Mortgage Brokers are not limited to only one Wholesale lender this gives Colorado Mortgage Brokers a competitive edge.  Colorado Mortgage Brokers have the ability to price out wholesale lenders and offer its borrowers the lowest wholesale rate available.  Colorado Mortgage Bankers and only offer what their wholesale lender has and if it is not competitive they too are not competitive.  Colorado Mortgage Brokers like Colorado Mortgage Bankers also have Overhead costs and Profit expectations priced into every loan.  The difference is that Colorado Mortgage Brokers only have overhead related to actual Colorado Mortgage production versus multiple lines of business in a Retail Bank.  Overhead tends to be lower and assuming the Colorado Mortgage Broker is offering you the same Profit margins their rates will most often be lower then the rates offered by a Colorado Mortgage Banker.

In summary, it is important to do you homework and not all Colorado Mortgage Brokers are on the up and up.  Colorado Mortgage Bankers typically have a small but fair profit margin built into their rates, where as a Colorado Mortgage Broker can pretty much charge as much as they want.  In these circumstances a Colorado Mortgage Banker will be you best options, however we have our price structured similar to most Retail Banking institutions and we benefit from Volume generated Profits.  This allows us to competitively price our Colorado Mortgage options and it is in rare situations that a Colorado Mortgage Banker can beat what we can offer.  It is so rare that I will match or beat any Colorado Mortgage Banker offer in order to win your business.

Finally some caution to all borrowers.  There are still many Colorado Mortgage Brokers that lack the ethical standards to provide you with an honest and accurate account of what your Colorado Mortgage will be at closing.  Bait and Switch is still a common practice and is far less likely to happen in the Colorado Mortgage Banker situation then a Colorado Mortgage Broker situation.  I can only say that with our services we are committed to ensure there are no surprises in your Colorado Mortgage Process.  This commitment is probably the biggest reason for our large referral business which we take great pride in.  We want you to be completely satisfied with your Colorado Mortgage experience and we know that working with any one of our Colorado Mortgage Brokers you can count on getting the best package available to you in the market.  Call me directly with any Colorado Mortgage questions, and take a look at www.coloradomortgagebanking.com/news for current Colorado Mortgage rate information.

Daniel