The lending landscape, like many things, has changed considerably over the last 20 years, 10 years and even the last 5 years. If you haven’t been able to keep up maybe it’s time to reevaluate the options and make sure you are making the best choices and making the best recommendations. The industry has seen lots of thinning out over the last 5 years and the laws of supply and demand have naturally weeded out the weaker competition. There are still 3 main options when looking for a Home Loan, the Big Banks, the Local Broker and the “Online” or Direct Lender. There are good people and options with each channel, but let’s relate them briefly to something hopefully we are all familiar with – Ordering a Pizza. So it’s Friday night and you are thinking about getting a slice of Pizza. You have 3 choices, the Large Chain Restaurant, the Local Mom and Pop or the Delivery Guys.

     #1 The Large Chain Restaurant – Banks

Large Chain Restaurants will often have pizza on the menu, think Cheesecake Factory. It’s a big corporate structure, the Pizza probably tastes fine, it’s consistent and there are standards to live up to. I’ve ordered pizza from these places, it’s fine, not terrific but you are pretty sure of what you are getting. You are relatively sure that the kitchen is clean your product will be delivered that evening, even if the wait is a little long sometimes. You pay a little more for this pizza because you get to sit down in their location and someone comes by and gets you a coffee or water while you wait. Banks are your big chain restaurants. They look the same everywhere and the menu could be diverse, they have lots of different financial services on the menu but they can get you a mortgage, it’s on the back page of the specials. If you want to go out to eat and don’t know the area, it’s safe to go to the chain restaurant and if you don’t want to do any research it’s safe to go to a big bank for a mortgage. Safe meaning you’ll probably pay too much, but you’ll know what you are getting.

#2 The Local Mom and Pop or Regional Pizza Store- Local Broker

Local Pizza Parlors can be related to your Broker’s office. The quality of a local store can be really hit or miss. There are fantastic pizza parlors all over the U.S. and the quality of those spots far exceeds anything the Big Chain restaurants can provide. A local shop will also specialize, if it’s not especially a Pizza Parlor it’s at least an Italian Restaurant and that’s much better in my opinion than a place that sells fajitas and pizzas in the same space. A place called Buddy’s in Detroit comes immediately to my mind as a prime example of excellence. There are Buddy’s Brokers offices in nearly every town, I’m sure people know of them and recommend them. The service is great and they charge a corresponding amount for their product, but for the average consumer who may not be in the market for pizza, or new to that area it’s hard to pick which one is the Buddy’s and which one is the Bust. The Bust will Bust your wallet and your patience. The work that goes on behind the scenes isn’t watched as carefully and the work may just not be as clean. In my opinion to Brokers are getting squeezed from both sides of the equation, the banks want to retain more money in fees and they already have the footprint in every town USA and they can control the quality themselves. While the Direct Lenders are getting more and more people to stay home and luring them with online updates and virtual tours of their Mortgage Kitchens.

 # The Delivery Pizza – “Online” Direct Lenders

These are the new kids on the block, even though the new kids are now old enough to have graduated college, gotten married and now have kids. Direct Lenders are indeed like ordering a delivery Pizza. Did you order Dominoes around 1989? Heard stories about it? Well, they were known for their 30 minute delivery times and absolute cardboard tasting pizza. It was quick and still got the job done so people kept ordering because at least they knew what they were getting. That’s like the Online Mortgage business, it wasn’t so great in the early days but competition does wonders. Papa Johns, Pizza Hut and many others started delivering more pizza with better quality, so Dominoes went back to the drawing board and reinvented it’s product to meet higher standards and went on a nationwide marketing campaign to re-educate their market. It worked for the most part, I just had a Dominoes pizza last weekend and it was actually pretty good. It was better than the chain restaurant (Bank) and less expensive than Buddy’s (Broker). The best part about Dominoes is that I can order it anywhere, I don’t have to be in Detroit to get a pizza I can live with. The prices are always reasonable, there are specials nearly every day and I can order online, over the phone or walk into the store. My wife and kids are Vegan and we can even order pizza for them and pizza for me from Papa Johns online, they have the full ingredients posted online for me to mix and match. If I go to a restaurant we always have to ask what the ingredients are and what the cooking process is like, about 50% of the time I’m 50% confident that the server knew the correct answer. I like the transparency and options that I get online.

Getting a mortgage for your largest asset surely takes more time and thought than ordering a pizza, but there some important lessons to take away. Banks may be the easiest solution to ensure the quality, but you’ll pay a premium for that building and the sign hanging out front. If it’s a local spot you probably want to make darn sure you got a very good referral and you know what you are getting into, otherwise accountability could be an issue. If you choose to bank online, shop online and research online, it’s safe to say you’d be happy with a Direct Lender who has a great online presence and interactive website. You may find that when you call in and there is a live person at the other end of the line that “Online” is more “Real Life” than you thought and you can start referring people there in the future.