Monday, September 9, 2013

Quantity or Quality of Mortgage Lenders?

Subconsciously, we’re programmed to think more is often better.

One example of where more is not necessarily better is with the number of lenders a broker advertises.

Brokers often quote relationships with numerous lenders. Just for the sake of illustration, we Googled “...Mortgage Broker” and examined the top five results. Here are snippets from each broker’s website:
  • “I will do the shopping for you with over 40 different mortgage lenders.”
  • “We have access to over 100 highly competitive public and private lenders…”
  • “…access to more than 50 lenders…”
  • 20+ lenders…”
  • “We deal with over 30 different mortgage lenders…”
20-100 is a pretty wide range.  Why not deal with the guy who has 100? Or better yet, why not find someone who has 200?
Focus on Quality...

To a consumer hunting for a good mortgage planner, there are far better ways to screen brokers than by the number of lenders quoted on their web site.

If you’re well-qualified and comparing different brokers, you’ll be better served by knowing:
  1. How many lenders the broker has top-tier status with (“Status” is basically special treatment that lenders bestow on their top brokers. Top-tier status at multiple key lenders gives a broker better rates and service, most of the time.)
  2. How many lenders the broker actually knows (“Knows” means “understanding the lender’s lending guidelines, benefits and downsides”)
  3. How many lenders the broker has actually closed a deal with (If a broker has closed just one deal with a lender in two years, there’s a higher chance he/she doesn’t know that lender’s guidelines and limitations.)
  4. What percentage of the broker’s deals go to his/her top three lenders (If a broker sends two out of three clients to his/her top 2-3 lenders, and offers you just a so-so interest rate and so-so advice, be very suspicious.)
  5. Does the broker quote market rates for lenders with tiered pricing (Reputable brokers never quote above-market rates in exchange for higher pay.)
  6. How long has the broker been in the business (Exceptions aside, there’s a strong correlation between broker tenure and knowledge. Lack of experience by a mortgage advisor can sometimes be costly for a borrower.)
  7. What is the broker’s approval ratio (Is the broker efficient? Or does a third or more of his/her applications get declined?)
  8. What is the broker’s typical turnaround time (If you’re time-pressed, will it take you one day or one week to get approved?)
It’s not all about quantity of lenders. It’s about quality...quality of advice, mortgage features, application preparation, service throughout the mortgage process, disclosure and, of course, quality of pricing. That's what we, at the Bob Hanscom Mortgage Agency focus on.


So, the next time you’re on a broker’s web site and read “we have access to over 100 lenders,” don’t be that impressed. A broker’s skill and value usually aren’t measured that way.

Source: Canadian Mortgage Trends, Rob McLister