Rates are flat today. Fed Chairman Ben Bernanke predicted long-term US economic growth today, yet stopped short of promising new QE3 stimulus. Mortgage bonds held flat and stocks are up. Today’s comparison mortgage rates with no lender fees are 4.25% on a 30 year, 3.375% on a 15 year and 2.875% on a 5/1 ARM. (click here for details)

I hope everyone had a great week!

In today’s episode, I dust off my 8-track collection and answer a viewer’s question. It seems everyone’s wondering why big banks have higher mortgage rates than the smaller mortgage bank or broker that sells loans to them. It doesn’t make sense.

Luckily I get a little help from my hair metal heroes.

It’s #FollowFriday! I highly suggest you show Brad, Eric, and Lucie some Twitter love. They’re some great Tweeps, and you won’t regret it!



I rock out in today’s episode:


(Watch it on your mobile phone or email reader here)

Today’s question is from Vincent in Indiana:

Mike, why do mortgage bankers and brokers have better rates than the lenders they are selling the loan to? My loan officer said he was locking me in with Bank of America. I called their local branch on the same day and their rates were .25% higher than his.

Why the difference?

That’s a great question Vincent!

I know it’s hard to believe, but it’s cheaper for Bank of America to buy a loan from a mortgage banker or broker than to originate it themselves. This method lets banks avoid paying for all of the expenses it takes to originate and close a loan.

Banks offer better rates to their correspondent lenders as a way to get loans in the door without taking on the costs or risks associated with originating the loan themselves.

Companies like Bank of America, Chase and Wells Fargo make most of their money by servicing the loans they buy, because that’s where the real money is at.

If you think you’ll get a better deal on your home loan from bigger banks, you will be very disappointed! Smaller lenders have the most competitive rates and costs.

I hope that helps, Vincent!

I thought today’s video was fun and educational. If you agree, I would love to have you help bring transparency to mortgage lending by sharing today’s episode on Facebook or Twitter.

Let’s change the way people shop for a mortgage…forever!

Have a great weekend!

– Mike

PS. To ask a question, get advice, or find out if you’re getting the best deal possible on your loan, just post a comment below. Daily comparison rates, calculators, and other cool features are available in the free Rates in Motion LoanApp by going to your smart phone and clicking on this link, activation code is 9203780002

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