Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
To get a mortgage in NYC, some home purchasers’ first reflex is to check Bank of America’s mortgage rates online. More broadly, you can contact either an (i) mortgage banker or an (ii) mortgage broker. The difference between a mortgage broker and a banker is that a mortgage broker cannot lend any money. The broker is merely originating and “brokering” a loan by selling it to a bank. In other words, a mortgage broker is a middleman. Therefore, the broker has limited skin in the game. Conversely, a mortgage banker typically represents a traditional bank lender like Wells, HSBC, JPMorgan Chase, or Bank of America. A bank typically commits its capital to fund a mortgage, even if it securitizes it later. Inversely, a mortgage broker is shopping for the best loan products among the community of lenders. Who are the best mortgage bankers in NYC?
In economics, mortgage brokers usually get paid either by the borrower or the lender. Therefore, they may earn 1 to 2% of the balance they originate and sometimes more. However, we hear that the payout keeps decreasing to around 1% or even less due to higher competition from fintech and direct lenders.
It is challenging for mortgage brokers to operate in a market like New York City, where big banks have such a strong foothold. Indeed, it takes a couple of phone calls for bank clients to talk to the bank’s mortgage lending division. First, we must disclose that paying referral commissions between real estate brokers and mortgage bankers/brokers is illegal. Then, we are happy to introduce the best ones out there, “no strings attached.”
NestApple also recommends using a mortgage broker for first-time homebuyers without knowing which banks are competitive in their area. The mortgage broker keeps updated records from banks for the best interest rates and products.
Lastly, mortgage brokers are in closer contact with the bank mortgage underwriter and decision-makers. For example, when working with a mortgage broker, you may not hear back for weeks on your commitment letter.
The mortgage broker is waiting to hear back from the bank’s underwriting department. The banker typically has easier access to their underwriter and sometimes talks at the coffee machine. Also, the mortgage banker may have more influence throughout the process and seek exceptions for specific concerns.
In short, the institution takes the credit risk for only a limited time before they sell the loan off its balance sheet. It does not service the loan, where most banks make money with late fees, prepayment fees, etc.
This is a “flow business.” The more they originate, the more they can recycle. Once they pay off the credit line, the correspondent bank can do it all over again. It draws on the line again to fund a new mortgage.