– Welcome to the third episode of The Insider's Guide to Mortgages. My name is Mike Renick, I'm the Team Lead, the Senior Broker with Team
Renick Real Estate, part of that great Keller
Williams on the Water family. In this episode, my guest, as in all of our mortgage series here,
is Mr. Brody Wiseman. Brody welcome.
– Great to be back. – Glad to have you here
again, as in every week. He is the Branch Manager
for Element Funding. And today we're talking about how mortgage companies make their money. That's an interesting topic. I've always been interested
with that, so Brody go ahead. – Well, so a lot of people understand how real estate agents make money. – Yes. And typically that's off commission, that usually comes from
the seller of the home. How mortgage companies make
money is a little different, especially because there's
more people involved in the transaction on the mortgage side.
So you're talking about a lot
more people getting paid, off typically a smaller margin
than what a realtor gets paid. So mortgage companies and
the way they make money is dictated by a secondary market, okay. – Secondary market? – A secondary market, I'm
going to explain what that means. – Okay. – So when you get a mortgage,
typically that mortgage is then sold to a
servicer or it's serviced by the bank which does that mortgage.
– Okay. – So there are certain margins,
certain pricing points, that they pay on certain types of loans. So what I'll tell the
clients at home is that mortgage companies tend to
make more money on convent- sorry government loans, and
what I mean by that are FHA, VA, USDA loans, than they do
on conventional and jumbo. So there's a margin that
they have to play with every single time they do a mortgage. There's a certain amount
of money that they need to make to be able
to pay the loan processor, the loan underwriter, the
mortgage loan officer, like me. There's a certain margin
that they need, and then there's a profit that the
company makes on the mortgage. – So can I look at what
you just shared in terms of who all gets paid as maybe
like the cost to consult that's the cost of the mortgage.
– Yeah, there's a fixed
price in there that companies need to make in order to be
able to run their business, to do their loans, cause there
is an actual cost on our side of getting things done that has to happen. But there is a margin to play with. And the reason I bring that up is it's a point of leverage for the client. – Okay – There's some negotiation power that they have when getting a mortgage. So, that fee that they're
looking at, what their interest rate is, how much they're
paying in closing costs, there's a little bit of play room anytime that they go get a mortgage.
So the main thing that I
want to relay to a client is that when you're going
through this process, when you're getting a
mortgage loan, you can add a lot of value by shopping
around a little bit. And that's something that, down the road, I'd love to talk more
about, exactly how to leverage and get the best deal possible.
– We can go deeper. So let me summarize if I may. It's like buying an automobile. Let's say you want to
buy a $30,000 Chevrolet and there's an invoice
price from the manufacturer, in this case General
Motors, to the dealer. Every dollar he sells over that
invoice price is his profit. – Exactly, exactly. So there's an ideal price
that mortgage companies wanna sell the product at, that's in a perfect world
where they'd like to be. But there's always some wiggle room, just like going to buy a car. You know if you're willing
to negotiate a little bit, you can always get yourself a better deal. And a lot of times people
are just satisfied with, with getting a mortgage
and being qualified and, it's something I said in
our introduction video, that if you're able to qualify one place, very likely you're going to
qualify at every place.
So you have a lot of power in this. And there's no reason, especially if you're going into this process prepared, to rush into anything
or to go with something when there may be
something better out there. – So the key is negotiate. – Negotiate. – Excellent. Brody, thank you. You're sharing a lot of wisdom through these video
clips, I appreciate that. Thank you for watching,
we'll be back again next week with more useful information..