Have you ever wondered how banks make so much money in the mortgage business? If you stop to think about it, mortgages are the ultimate commodity product these days. The bank collects information from you, gives you a loan, outsources the customer service to a loan servicing company, and securitizes your loan.
So how do banks make money? It’s ‘easy.’ They sell you a loan at a higher rate than they’d be willing to settle for. A mortgage is a big, unpleasant, complex process that includes some stranger pawing through your financial life. Making a bad choice is worrisome. Most people apparently get very few quotes, and are told that their rate depends on their credit score.
There’s a strong imbalance in the information that each side has, and my friends at SmartHippo have just launched a site to help correct that imbalance.
If you’re getting a mortgage, or just want to compare, check these folks out. I really like what they’re doing and where they’re going.
What would it be like if buying lemonade was as complicated as shopping for mortgage rates? See what happens when little Jenna opens a lemonade stand and tries to maximize profit at the expense of her customers.