Finding an independent mortgage broker?

September 16, 2020 12:39 PM

I've been reading about mortgage brokers and I was under the impression that the broker, an independent firm, would get quotes from multiple banks to help me find the best options. However, as I actually look for brokers on the internet, they all seem to be associated with a particular lender (not necessarily the large banks, for example I see Guaranteed Rate frequently). Do independent brokers as I have been imagining them exist? How do I find them?

I'd like to get pre-approved for a mortgage in case I decide to buy a house. I don't have a specific timeline for buying, but if I see one I'm interested in, I want to be prepared. I know mortgages are often sold and it's not the lender itself that I'm concerned with, but the comparison process.

I'm not an experienced homebuyer (I have bought once before, but I just went with the person I was referred to by my realtor), so it's possible that I fundamentally misunderstand how mortgage lenders work. Or maybe the role of the broker has changed in recent years?

(I'm in the SF Bay Area, just in case anyone has a recommendation!)

Thanks!

posted by findabair to Work & Money (8 answers total)

Well, the problem here might be the internet algorithms favoring those bigger companies. I used a mortgage broker in Oregon who isn't associated with any one company but got his name through my realtor ages ago, and have since given his name to a handful of friends. So, ask your local friends, maybe? This is a great use of social media, if you're on it. Otherwise, maybe trying searching "independent mortgage broker san francisco" as a starting point.
posted by bluedaisy at 1:11 PM on September 16, 2020

The fact they are all recommending the same deal does not necessarily mean they are tied to that mortgage provider, it could just be that they all scan the market for deals every month, and right now lender X genuinely has the best deal for your needs.
Another way to think of this is if you had 3 quotations from different brokers and they all recommended different mortgages, that would imply that at least 2 of the brokers were doing a bad job.
I would still 'sanity check' the offer by going direct to a bank or two just to make sure you can't do better yourself.
posted by Lanark at 1:21 PM on September 16, 2020

I don't know the underlying mechanics, but in my experience shopping around definitely pays off. I got a significantly lower rate from a very small local bank (recommended by a friend) than from a large national bank, a larger broker, and the two banks that I used for many years. If you have good credit, do a full application and get a quote. Then bombard a bunch of places with "Can you beat this rate?" inquiries, which should take only a few minutes. If they say yes (or maybe), then you can go through the application process with them.
posted by Mr.Know-it-some at 1:49 PM on September 16, 2020 [1 favorite]

There are a few mortgage brokers that get quotes from multiple lenders - LoanFactory is one, and Seattle's Mortgage Broker is one locally in my area. However, they are quite uncommon.

The vast majority of people referred to as brokers are actually loan officers for small financial groups that resell their loans to Fannie Mae/Freddie Mac. As you already said, the vast majority of lenders resell their loans. Outside of massive financial firms (Chase, Citibank, etc), banks can't actually afford to have a significant mortgage portfolio - quite simply, they run out of money to lend out. Even massive financial firms generally resell to Fannie/Freddie. So, when you are "shopping for a mortgage", you are really just talking to a whole bunch of small financial companies that sell loans. In some cases, different companies will be more/less efficient in their pricing (some will handhold more, and hence, charge more), and different companies will have slightly different bets on future mortgage rates.

There is very little profit in shopping lenders for you because (unlike insurance companies) very few competitive lenders offer commissions to brokers any more. The lenders that do offer commissions tend to be the larger banks that offer less competitive rates - essentially, you pay a slightly higher rate in order to offer a commission to the broker. Since most people can really quickly shop lenders on comparison sites like Bankrate, brokers offering worse terms tend not to get many customers.
posted by saeculorum at 2:22 PM on September 16, 2020 [1 favorite]

I'd like to get pre-approved for a mortgage in case I decide to buy a house. I don't have a specific timeline for buying

PNC will write you a conservative pre-approval letter based on what you tell them, without doing a pull on your credit, even if you've never had any account with them. It's what I did first before I had solid plans because I didn't want that hit on my credit score at a time when my credit score was so important.

I don't know shit about mortgage brokers, but I did just buy a house this summer, and I got my mortgage through Fairway. Got a great rate and had a very good experience.
posted by phunniemee at 2:54 PM on September 16, 2020

Shopping lenders makes a HUGE difference so pls ignore any advice that tells you otherwise. I did a refi 2 months ago and the difference between the quotes was a sin.
posted by cacao at 2:56 PM on September 16, 2020 [2 favorites]

I’ve gotten three mortgages in the past two years (first mortgage and two refinances) through OwnUp, which doesn’t operate in California currently so it’s no good for the OP but it does just what you’re looking for, gets quotes from lots of lenders and recommends the best ones. So I’m including it for people in the states they do serve! All of the 30-year mortgages they showed us quotes for had the same excellent interest rates (better than what local/national banks were advertising) but the closing costs varied a lot.
posted by mskyle at 5:46 PM on September 16, 2020

I haven't used a mortgage broker since the finanical crisis in 2008. Prior to then, I had found an independent broker that was able to consistently find me good deals as a refinanced while rates were dropping. Afterwards, I tried the broker twice but was able to find better rates on my own. I don't know for sure but I've wondered if the all the new regs after the crisis limited the good deals that you could get from specialized outlets via the mortgage brokers.

Note that in Bay Area, the national find a mortgage folks, like Quicken Loans, have been consistently higher than local quotes. I usually try a mix of big banks and credit unions. Most recently we got our best rate with Chase, which was not what I had expected. So do shop around and shop around again when you are ready to actually buy the house since rates change and the best source may be different by then.
posted by metahawk at 7:49 PM on September 16, 2020