Having enjoyed success both as a mortgage broker as well as a mortgage banker I feel comfortable in illuminating a not-uncommon broker practice. Of course, a mortgage banker can do the very same thing when they also broker out loans (did you know they could do that?) to other mortgage lenders. A mortgage broker may or may not know where your loan is going to end up. But you can bet they have a pretty good idea. So why don't they tell you?
Mortgage brokers' forte is having the ability to shop your loan around to attempt to find you the best rate around and/or find a loan you can qualify for. "Let us shop around for the best rate," or "We can find you the best loan for your situation," or some such advertising is everywhere -- at least so it seems when you're searching for a home loan.
And in practice, that's what happens. Many moons ago, as a mortgage broker in San Diego, I did just that. If I was looking for the best rate I would spend a little time reviewing the multitude of rate sheets spewing from my fax machine. Or if I had a unique qualifying situation, I would open up my trusty Rolodex full of "alternate" lenders and start dialing for dollars, explaining my client's unique situation to any lender who would listen.
The fact is, if you were to call up any mortgage broker today and get a rate quote for a 30 year fixed conforming home loan, that loan officer wouldn't put you on hold or call you back later with more information, that loan officer knows exactly what the rate is. And you get your quote. The difference might be where that loan actually gets sent. That difference won't be which lender offered 6.00 percent instead of 6.50 percent. No, most lenders are almost the very same when it comes to rate.
So far so good, right? But what if the loan terms appear to be so far different than any other quote you've gotten? What if you're getting rate quotes all over town between 6.375 and 6.625 percent while one loan officer offers 6.00 percent at the very same price to you?
Would you get suspicious or would you pat yourself on the back for being so smart to find the lowest rate on the planet? Personally, I would get suspicious.
Or let's say you have some unique requirements. Let's say you want to buy an investment property but the loan you're looking for won't qualify you because you have no landlord experience or the investor loan program you like asks for six months' worth of house payments stashed in the bank as cash reserves. Both of these requirements are common loan conditions for investment properties.
If you've called all over town and no one will let you overcome those obstacles then you've got a problem. When suddenly the phone rings and it's one of the loan officers you've just spoken to. "Hey, great news! I found a lender who will do your deal without any money in the bank!" You jump for joy, exhale and then call your Realtor with the good news.
But would you get suspicious? Again, I would.
So how do you know if your loan officer is telling you the truth about that new lender who is way below market or who is approving loans no one else will? It's simple. You ask the loan officer who the lender is.
And here's the stumbling block. Some loan officers guard this information with their lives. Some loan officers won't tell you for fear that you'll go directly to that lender and leave them out of the loop entirely. After all, they did all work finding you this great deal and how you're going to bypass them altogether. Fair enough. But why would you do that in the first place? If a loan officer did all that work for you and the loan was competitively priced would you try an end-around? Especially if there was nothing to gain? Of course not.
Still, some loan officers keep their lips shut when it comes down to identifying their lending sources. And they shouldn't. Especially since this is the way that you can find out if the deal you are being offered is legitimate.
"Sounds great. Who's the lender going to be?" If you've got a confident loan officer, he will say "ABC Bank" or "XYZ Home Loan." If you've got a loan officer that stammers, stutters and says things like, "Well, that's confidential information" then I would get more than suspicious. After all, you'll eventually find out who the lender is anyway, so why would anyone try to hide that information from you?
To try and get your loan application anyway while looking for your deal. Or at the last minute tell you that for some other reason the loan didn't' qualify or the lender cancelled the mortgage product.
Me, I would always tell my borrowers who I've locked their loan with and who the loan will eventually go to. Some loan officers try to keep that information secret for some reason and it's always bugged me.
There should be absolutely nothing wrong with your mortgage broker telling you who your lender is going to be, especially when you're just doing a little shopping and even more so if you've got a unique qualifying requirement or the rates seem too good to be true. So go ahead. Ask.