I’m making progress.  I made progress yesterday. I am making progress today.  And I know I will make progress tomorrow.

Sometimes it doesn’t feel like I am making progress but I am.

If I am not directly improving my situation I am learning about what doesn’t work.

I’ve been on a long journey that has lasted almost 13 years and I am still not “finished”.  I’m talking about my weight-loss journey.  When I started I was clueless about health, wellness and fitness.  It just wasn’t on my radar.

I didn’t really give much thought to what I ate…or drank.  If it sounded good and I wanted it I would eat or drink it.  Simple as that.  I can’t remember exactly why I decided to change my path but for whatever reason I started down a new path.  And since then I have managed to lose over 75 pounds!

Since that time I have taken many paths.  Some resulted in dead-ends.  Some took me down a wrong path.  I would find my way back to the “right” path and end up moving forward again.

But there is one thing I have never stopped looking for.  I am guessing you might be able to relate.  Whether your path is to lose weight, save money, build relationships, or buy a house we all do this.  We are all constantly on the hunt for this.

We Want Shortcuts

The easy path.  I think it is human nature.

Going back to weight loss for a moment consider the number of diet books, fitness trends, weight-loss programs and workout DVDs.  The weightloss industry is HUGE!

When we see something that promises the result we want with less work we jump at the chance…or at least consider it might be just what we are looking for.  This is why advertising exists.

The new car promises that your commute will be more enjoyable.
The fancy new gym will make working out a game, instead of a grind.
The new app you download on your phone will make it easier to find Mr. or Mrs. Right.

Whatever it is we desire we want it now.  We want it for less.  We want it to be easy.

I was no different.  I tried new workout routines.  I tried new diets.  I still try new things because…well, you never know, right?!

Look at What I Stumbled On

I stumbled across something very interesting and I wanted to share it with you.  You are considering a home purchase, or maybe a refinance.  And all of a sudden you are on Facebook or Google or some other website when the promise pops up and smacks you in the face.  The ad promises GREAT LOW RATES or FAST PRE-APPROVALS or NO CLOSING COSTS.

It sounds great.  It looks like this could finally be exactly what you are looking for so you can make a home purchase a reality.  You just needed that little boost and this ad is claiming it can solve your problem.

Before you jump at these mortgage ads, let me share a little something with you that you probably already instictively know.

Mortgage Companies Generate Income in the Same Way

Mortgage companies all make money in the same way.  There is nothing special about ABC Mortgage Co or XYZ Mortgage Co that they can generate more income than their competitiors.  Just like a grocery store or a shoe store.  They all work the same way.  They are just packaged in different ways to appeal to different customers.

Prefer to shop online visit Zappos.  Like the low-cost option?  Just head over to Payless.  Looking for a sports shoe?  Check out Nike or Dicks Sporting Goods.  But ultimately they all generate their income by buying the goods wholesale and selling them at a higher retail price.

Well, mortgage companies are no different.  The market sets the interest rates charged and the closing costs charged help cover costs.  There may be some small efficiencies gained through business practices but those differences will be minimal on an individual basis when you are looking to get a mortgage.

Breaking it Down

Let’s say each mortgage company makes $100 every time they do a mortgage for a simple illustration.

What happens with this $100?  Well, here are the different places that money might go:

  • Profit
  • Paying Employees
  • Business Expenses (rent, utilities, health care, etc.)
  • Advertising

We will keep it simple and limit it to those areas.  Now, let’s take that $100 at look and at the different ways mortgage companies could spend the money while assuming that all companies want to make a similar profit of $25 and each have $25 worth of business expenses.

The Options

The company could spend the remaining $50 equally on employees and advertising – $25 each.
Maybe they could spend more on advertising and less on employees – $10 on employees and $40 on advertising.
Or they could spend more on their employees and less on advertising – $40 on employees and $10 on advertising.

Should you care?  As a buyer do you care?

You Should Care and Here’s Why

If you were going in for brain surgery would you want the hospital that pays their doctors really well or the hospital that advertises to get you to come in but doesn’t have the funding to get the top-notch doctors?

Now, let me show you something:

I stumbled on this the other day and it SHOCKED me.  What this shows is that LendingTree.com is spending over $2,200,000 every single month to advertise to you.  QuickenLoans is paying almost $900,000 every month to get you to click on that ad or call them using their newest marketing campaign, Rocket Mortgage.  And that is just through Google.  What about Facebook, Bing or other advertising channels?!

The Choice They Made

What have mortgage companies like Quicken Loans or those that pay to be a part of Lending Tree chosen to do?  They have chosen to spend their pool of money on getting people to click, call, visit, whatever so they can get them over to a “rep” inside their company to help you.

By MÁV Zrt. (MÁV Zrt.) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
I am calling them a “rep” because that is what they are.  They are not a skilled loan officer with years of experience who can assist you in obtaining a complicated the best financial product to help you buy your home.  Instead they are there to take you through a series of pre-built screens, prompts or workflows to get you to finance a home using a vanilla mortgage product that may or may not be the best option for you.

What about When…

What happens when something doesn’t go exactly right?  With over 15 years of doing mortgages I can tell you that it is a rare situation when the mortgage and real estate transaction gets to closing without something having to be resolved.  When that something happens you will want the skilled loan officer on your side and not the “rep” sitting behind a computer screen stepping them through different questions to help you resolve the problem.  It is not that they don’t care but they just don’t have the experience.  They also know that if you don’t close they will not be negatively impacted.  They still get paid and their reputation is still intact.

Commission is Good

I will go so far to say that you do not want a non-commissioned loan officer helping you.  You want someone that is invested in your transaction getting to closing.  You want someone that is at least partially as interested in closing your mortgage as you are when you are all packed, moving truck scheduled and paid for, and you’ve given notice to your landlord to move out.  Then, when that something comes up your loan officer will be looking for every possible way to find a solution for you so they can also get paid, protect their reputation in their local market, pay their own bills, take care of their own family…and, of course, help you make the home purchase.

We have years of experience helping thousands of customers buy and refinance giving us the experience to help you.  Help you to select the right mortgage product.  Help you to navigate through the transaction.  Help you when that something comes up.  When you are ready to buy or refinance call us.

Leave a Reply

Close Menu