No Lender Fee No Commission
2/22/2023 – VIDEO – I’ll explain how the things these companies say are true, but at the same time manipulative.
The Lender Fee and the Commission are two separate things…
The lender fee is a reflection of the interest rate selected/offered while commission is a word we use to describe an employee pay structure. No matter the lender fee, or the way the company pays it’s licensed employees, the “lender” is ALWAYS making a percentage yield on the mortgages they originate.
Nearly every lender is able, and most mortgages can be done with “no lender fee”…
To get a mortgage with no lender fee you are selecting a higher interest rate than you’d get if you DID pay a lender fee. This is the same old discount point discussion. Pay discount points and increase your lender fee to get a lower rate and see if that will benefit you more than less closing cost and a higher rate. In some instances you may be planning to refinance in the near future and in those cases you’ll never save on rate what you spent up front so a “no lender fee” structure makes sense. This is not a special ability that only certain lenders have, it’s available to any originator that works hard to properly structure mortgages for their clients. It’s also important to note that a “no lender fee” loan structure might not be the best option for every individual so assuming it in their marketing is an obvious sign they’re willing to play with the truth.
No Commission is not the big benefit they try and make it out to be…
It is certainly possible for a mortgage company to operate without paying commission, however it’s not going to give you the best results and doesn’t have anything to do with the rates offered by the lender other than it might actually make them higher to account for more flexibility. Commission incentivizes licensed loan officers to build and create their own business. They do that by being the best and nobody who has the mindset of being the best will be happy accepting a salary while the company rakes in extra profit from their hard work. Commissions ensure you, as a consumer, have a better chance of getting a great loan originator when you’re out there shopping around for your mortgage. If I decided, as a company owner, to pay a salary instead of a commission do you think I’d err on the side of me making more, or my employee making more? Commissions mean accountability on both sides of the equation.
They’re trying to make you think things are different than they are…
Marketing teams at lenders use these terms because they know it can trigger positive reactions from consumers. People have a negative association with commission because they fail to see it’s benefits so some lenders decide to take that angle. Many consumers see “no fee” and think “that must be some kind of deal I’m getting“. They most often neglect to consider the extra 1/4 or 3/4 percent in the interest rate that they are paying, and focus on the freebie. It’s simple sleight of hand by the lender. They want you to look at the $0 lender fee and forget about the more important thing. Most consumers don’t realize that a $0 lender fee is actually something nearly every lender can do because it’s just a function of mortgage fundamentals.
Bottom line…
Marketing is still manipulative. Investigate, shop around and decide for your self.
