Get loan via brokers vs. directly from banks

[Chris Penny]

I know this is a very basic question but it's still a myth to me. A broker is like a middle man so I guess I would save if I get a loan directly from banks, wouldn't I? Of course working with brokers has the advantage of getting rates from multiple lenders at the same time, but can I just shop around enough to get a good one? Then why are brokers so popular? Am I missing any points? Thanks

[Chris Mason]

Originally posted by @Chris Penny:

I know this is a very basic question but it's still a myth to me. A broker is like a middle man so I guess I would save if I get a loan directly from banks, wouldn't I? Of course working with brokers has the advantage of getting rates from multiple lenders at the same time, but can I just shop around enough to get a good one? Then why are brokers so popular? Am I missing any points? Thanks

Don't sweat the titles. After CFPB and Dodd-Frank, it's become homogenized broadly into A) depository banks and credit unions, and B) mortgage banks. I'm at one of the (B) places, generally identified by it having something like "home finance," "home loans," or "mortgage" somewhere right in the company name (that's your hint that you can't open a savings account there or get a car loan...). Firms like this tend to only folks that are licensed to direct lend, correspondent lend, and broker. Depository institutions can only do the first of those three, generally (but CAN do the savings account and car loan). On the mortgage side of things, (B) is presently gobbling up market-share at the expense of (A), while CEOs of large depository institutions acknowledge openly that they suck at mortgages (the (B) places poaching top talent from the (A) places does its part too :P ).

There are outliers and lawbreakers, but rates got relatively flat after it became unlawful for the mortgage loan originator (regardless of title) to get paid more or less depending on your particular interest rate. Now it's mostly about who can deliver reliably, consistently, and on time, without the borrowers committing suicide (that part is mildly important) by the time we're done dealing with the over-regulation that currently dominates mortgage lending. I am of course a biased source of information, double check everything above with an experienced real estate investor that you trust.