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New Research Concludes Consumers Save $10,662 Working With a Mortgage Broker

Study also proves the crucial role brokers play in promoting homeownership to minorities and veterans

Pontiac, August 28, 2024 – A recent study conducted by Polygon Research, with support from Willow Canyon Advisors and United Wholesale Mortgage (UWM), has concluded that the wholesale channel provides substantial savings for consumers on average across various mortgage verticals and within a standard reference loan profile.

Most notably, the study, which examined the most recently available 2023 HMDA data, found that consumers save an average of $10,662 over the life of the loan when working with an independent mortgage broker as opposed to a nonbank retail lender.

“As we’ve been saying for over a decade, the wholesale channel continues to showcase time and time again that it is the best place for a consumer to get a loan,” said Mat Ishbia, president and CEO at UWM. “This data further proves that when consumers work with an independent mortgage broker, they typically save thousands of dollars, and almost always have a faster, more seamless and personalized experience. The broker channel has seen tremendous growth over the last few years because of these direct consumer benefits. We don’t believe it is unrealistic for the channel to reach 50% market share and will do all we can to support our partners and educate borrowers.”

Borrowers are also seeing significant savings on average in upfront costs. For example, in 2023, a year marked by generation-high interest rates, home purchase consumers in the wholesale channel paid an average of 115 basis points upfront to obtain a 6.58% average interest rate, compared to 148 basis points upfront and a 6.60% average interest rate in the nonbank retail channel.

“For years, our own analysis has shown that mortgage brokerages supported by wholesale lenders provide consistently better value to consumers,” said Willie Newman, principal of Willow Canyon Advisors. “It’s exciting and validating to see that this is supported by an expert third-party research company, and that the 2023 results continue supporting the mantra ’brokers are better.’” Beyond the savings over the life of the loan, the study also concluded that veterans and minorities benefit significantly by going through the wholesale channel.

VA Loan Savings

On VA loans from non-bank lenders specifically, borrowers save an average of $13,432 per loan when working with an independent mortgage broker as opposed to a retail lender.

In addition, VA borrowers who obtained their loans through the wholesale channel received a 6.26% rate on average compared to a 6.40% rate from retail lenders and had to pay less than a percentage point (87bps on the loan amount) compared to the retail channel (106bps).

Serving Minority Borrowers

The wholesale channel also saw a higher percentage of home purchase loans originated to minority borrowers compared to the retail channel. In 2023, over 1.4 million loans were originated in Minority Majority Census Tracts (MMCT). Among non-bank lenders, the wholesale channel showed higher approval rates for all loans in MMCT (70%) compared to retail (58%), as well as non-MMCT (75% vs. 64% for retail).

“The research shows brokers not only offer better deals on average, but also excel in reaching minority communities, especially in times when affordability is a key concern,” said Jonathon Haddad, CEO of the Association of Independent Mortgage Experts (AIME). “The numbers in this study speak for themselves, and further underscore the importance of educating consumers across the country on the benefits of getting a mortgage with an independent mortgage broker.”

The high percentage of home purchase loans originated to minority borrowers through the broker channel highlights its crucial role in promoting homeownership among underserved communities. The study demonstrates that independent mortgage brokers, with their local presence and access to a wide range of loan products, are often better equipped than retail loan officers to understand and address the unique financial needs of minority borrowers, providing personalized guidance and support throughout the homebuying process.

Consumers looking to work with an independent mortgage broker should visit MortgageMatchup.com. For more information on how to become an independent mortgage broker, visit BeAMortgageBroker.com.

Study Methodology

To analyze these findings, Polygon Research utilized the most comprehensive mortgage lending data sets from the Home Mortgage Disclosure Acts (HMDA) and monthly agency single-family performance and MBS data, totaling over 5 billion detailed loan records with the most current data available as of March/August 2024, depending on the data set. Polygon blended HMDA data with FFIEC Census data to provide population patterns in the context of mortgage finance activity. All analysis is based on loan-level data.

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My name is Kevin Retcher, owner of First Meridian Mortgage, is a recipient of the Top 200 Loan Officer in the nation multiple times by Scotsman Guide. We have one of the lowest margins in the wholesale channel and execute at the highest level. We never make more than 1% on a mortgage. I know that if the savings was compared to our loan level pricing it would be higher. The good news is that this study proves the Statement. That Mortgage Brokers are Better. Call First Meridian Mortgage for all your Mortgage Needs. A Veteran Owned Business.

Ultimate Guide to No Closing Cost Refinance

The Formula behind the NO Cost Refinance

 

No Closing Cost Refinance Explained

Refinancing a mortgage can be an excellent strategy for homeowners looking to save money, and in my 27 years of experience, I’ve found that a No Closing Cost Refinance is often the best approach. Since 1994, I’ve been helping clients refinance their homes without paying upfront closing costs, and I’ve seen firsthand how effective it can be, especially when loans are above  $200,000.

Why Refinance? Homeowners refinance for various reasons, with the most common being to save money by securing a lower interest rate. Others may pursue a cash-out refinance to access home equity for repairs or debt consolidation, or to switch from an adjustable-rate mortgage (ARM) to a more stable fixed-rate loan. Whatever the motivation, closing costs are a key consideration, and understanding the benefits of a No Closing Cost Refinance is crucial.

What is a No Closing Cost Refinance? Let’s clear up a common misconception: Yes, there are still closing costs with a No Closing Cost Refinance. However, instead of paying these costs out of pocket, you receive a credit from the lender based on the interest rate you select. This credit covers your closing costs, and any excess can go towards your escrow account.

In comparison, a regular refinance typically offers a slightly lower interest rate, but you pay the closing costs upfront. The difference between the two rates is usually about 0.25% to 0.375%. While paying the closing costs may seem appealing due to the lower rate, it can make you hesitant to refinance if you fear rates might drop further.

Why Choose a No Closing Cost Refinance? Opting for a rate that covers your closing costs allows you to refinance without the worry of upfront expenses. If rates decrease after 180 days, you can refinance again, continuously lowering your mortgage rate over time. This approach has helped my clients “chase the market down” for nearly three decades.

How Lender Credits Work Banks offer credits because they price mortgages based on the credit pools they might be sold into, such as those created by Fannie Mae or Freddie Mac. These pools include a range of rates—typically 0.25% lower and 0.25% higher than the average in the pool. The higher rates generate more value over time, leading to the credits that cover your closing costs. This allows you to secure a lower rate than you currently have, creating a No Closing Cost Refinance opportunity.

When to Consider Paying Some Costs There are instances where a hybrid approach—paying some costs while using lender credits for others—can be beneficial. However, it’s crucial to ensure that the recoup time is short, meaning you’ll save money quickly enough to justify the upfront expense.

The only time you should consider paying all the costs is if you believe rates are at their lowest or in a rising rate environment. Even then, it’s essential to calculate the recoup time carefully. Mortgage rates are cyclical, typically moving up and down over a two-year period, so running the numbers on each deal is vital.

Customer Insight A former Freddie Mac employee, who has refinanced 13 times with No Closing Cost Refinance, shared:

“I want to use the bank’s money to cover my closing costs. They think they’ll make more money over 30 years, but I’ll take the savings now, refinance again if rates drop, and use the savings to pay off my mortgage sooner.”

This strategy has empowered many homeowners to save money and pay off their mortgages faster by consistently leveraging No Closing Cost Refinancing.

 

No-Closing-Cost Refinance Options at First Meridian Mortgage

Refinancing your mortgage is a strategic way to lower your interest rate and monthly payments. At First Meridian Mortgage, we offer three distinctive no-closing-cost refinance options to suit different financial needs:

  1. No-Cost Refinance with Prepaids Brought to Closing

This option allows you to refinance without rolling any costs into your loan balance or increasing your interest rate. Instead, you pay the prepaid items—such as property taxes and insurance—upfront at closing.

  • Benefits: Keeps your loan balance and interest rate unchanged, potentially saving you money in the long term. Principal balance continues to go down.
  • Considerations: Requires having the cash on hand to cover prepaid expenses at the time of closing.
  1. No-Cost Refinance with Prepaids Rolled into the Loan

With this option, both the closing costs and the prepaid items are incorporated into the new loan amount. This increases your loan balance but avoids any upfront cash requirement.

  • Benefits: Eliminates the need for upfront cash payments, making refinancing accessible even if you don’t have immediate funds. You are borrowing from yourself, this is not a cost. You can make a principal payment when you get your escrow check back from your old lender.
  • Considerations: Increases the total loan amount, But you essential are borrowing from yourself if  the rate you are getting is lower? Then it still make financial sense to do. there is no recoup you are saving money.
  1. Hybrid – No-Cost Refinance and no out of pocket (All Costs Rolled In)

Sometimes in the market loan pricing could be better with a small contribution toward the closing cost. You have to do the math in these situations. This comprehensive option rolls all fees, including lender fees, title fees, appraisal fees, and prepaids, into your loan amount. It’s designed for maximum convenience.

  • Benefits: Completely eliminates any out-of-pocket expenses at closing, providing the most streamlined refinancing process.
  • Considerations: Results in the highest increase in your loan amount, which could lead to higher long-term financial costs due to increased interest payments.

How First Meridian Mortgage Supports Your Refinancing Needs

At First Meridian Mortgage, we understand the importance of a tailored refinancing strategy. We offer:

  • A variety of loan products that cater to different refinancing needs.
  • No Cost refinance VA Streamline IRRRL’s (Interest rate reduction refinance loan) FHA streamline, Jumbo No Closing Cost Refinances.
  • We Have a commitment to providing transparent and effective solutions to help you achieve your financial goals.

Whether you’re looking to adjust your loan term, decrease your interest rate, or consolidate debt without heavy upfront costs, First Meridian Mortgage is here to guide you through every step of the process. If you have any questions or need further information, our expert team is ready to assist you at our conveniently located offices in Virginia, Maryland, and Washington DC.

For personalized guidance on which no-closing-cost option is best suited to your situation, contact First Meridian Mortgage today.

Bottom Line A No Closing Cost Refinance is a smart choice for many homeowners, allowing you to refinance without the burden of upfront costs. By understanding how lender credits work and carefully considering your options, you can make informed decisions that save you money now and over the life of your loan.

 

 

 

NAR Settlement: Key Changes for Buyers and Sellers

Navigating the New NAR Settlement: What Buyers and Sellers Need to Know

Navigating the New Real Estate Landscape: What the NAR Settlement Means for You

Hi, I’m Kevin Retcher, owner of First Meridian Mortgage and KSA Insurance Agency, and a licensed realtor with Jobin Realty in Springfield, Virginia. In today’s blog, I want to walk you through some significant changes in the real estate industry brought about by the recent NAR (National Association of Realtors) settlement, which took effect on August 17th. These changes could dramatically affect how listing and buying agents are compensated, potentially altering your approach whether you’re buying or selling a home.

Understanding the Previous System

Before diving into the new rules, it’s important to understand how things used to work. Traditionally, listing agents negotiated a sale price with sellers, which included a commission split with a buyer’s agent. This commission was then posted in the MLS (Multiple Listing Service). This setup, however, often led to situations where buyers might be shown homes that financially benefited their agents the most, rather than those best suited to their needs.

Buyer’s agents typically included their commission—often 2.5% or 3%—in agreements with buyers, implying that the seller covered it. However, this commission was actually built into the home’s price, meaning buyers often ended up financing this cost.

The Game-Changer: NAR Settlement

The new NAR settlement significantly changes how listing agents interact with sellers and how buyers work with their agents. The key focus now is transparency.

Key Changes for Sellers

  1. Compensation Clarity: Sellers now have several options to discuss with their listing agents, including:
    • Full listing services
    • Unrepresented buyer compensation
    • Buyer’s agent compensation
    • Limited services
    • Variable commission rates

    These choices offer more flexibility based on sellers’ preferences and budgets.

  2. Negotiation Flexibility: Agents must now clearly outline every detail regarding fees and services in their agreements. This eliminates ambiguity and ensures that both parties understand what’s expected, reducing the potential for misunderstandings.
  3. Transparency in MLS Listings: MLS listings must now accurately reflect the negotiated compensation terms. Sellers have a simple yes/no option regarding buyer’s agent compensation, moving away from the old percentage-based listings that could be misleading.

Considerations for Buyers

Buyers also need to navigate these new changes carefully:

  1. Negotiable Buyer’s Agent Compensation: Buyers can now explicitly negotiate their agent’s compensation upfront, defining precise terms, which can impact the overall cost of purchasing a home.
  2. Agency Agreements: It’s recommended that buyers interview multiple agents to find one whose services and fees align with their needs. Understanding the agreement’s term, which could range from a single day to several months, is crucial, especially regarding dual agency scenarios where the agent might represent both buyer and seller.
  3. Limited Services Option: Buyers who are comfortable handling parts of the home-buying process themselves can opt for a limited service agreement, where the agent assists only with specific tasks like writing contracts.

Pro Tips for Navigating the New Paradigm

For Sellers:

  • Scrutinize Listings: Ensure all compensation and service terms are clear before signing.
  • Evaluate Agent Proposals: Consider the value and services each agent offers, not just the commission rate.

For Buyers:

  • Understand the Costs: Know exactly what you’re paying your agent and confirm whether the seller covers these costs.
  • Negotiate Transparently: Have open discussions with your agent to avoid surprises later.

The Implications of the New Rules

These new rules are designed to create more structured and transparent transactions. While they aim to benefit both buyers and sellers, they also require everyone involved to be more proactive and informed.

For Sellers:

  • Have Detailed Discussions: Fully understand the new compensation structures and discuss all scenarios with your listing agent.
  • Review Contracts Thoroughly: Carefully review compensation clauses, termination dates, and potential fees before signing.
  • Leverage Open Houses: With new unrepresented buyer options, consider conducting more open houses but be prepared for additional negotiations.

For Buyers:

  • Interview and Negotiate: Interview several agents and negotiate their commission upfront.
  • Understand Financial Implications: Be clear on how agent fees will be covered, and how this impacts your budget and financing.
  • Keep the Timeframes in Mind: Ensure your agency agreement’s duration is suitable for your home search needs.

Conclusion

The NAR settlement introduces a new level of transparency and negotiability in the real estate market. By understanding these changes and engaging proactively with your agent, whether you’re buying or selling, you can navigate this new landscape effectively. Always take the time to read contracts thoroughly, communicate openly, and negotiate terms that meet your needs.

If you have any questions about the NAR settlement or need assistance with real estate or mortgage services in Northern Virginia, feel free to reach out to me, Kevin Retcher, at First Meridian Mortgage. With over 27 years of experience in the industry, I’m here to help you understand and maneuver through these changes. Contact me at 703-799-5626, and don’t forget to like, share, and subscribe for more updates and insights.

To all the Marines out there, Semper Fi!

Let’s make your real estate journey as smooth and successful as possible