Referral Sources Most Likely To Find You The Best Mortgages

Any adult should be under no illusion that a lot of money is to be made in every single real estate transaction taking place.

And it is enough to feed a multitude of professionals and service providers.

This is why any party in the real estate value chain tend to prioritize clients by judging (and even measuring) the likelihood of closing and how soon closing will be.

If we are to break down in detail the amount of money each service provider in the value chain profits, the biggest profiteers are probably between the seller and lender.

But because the profits a seller can squeeze out of the proceeds of sale depends on the amount of equity in the house or cost of construction to the developer, it is fair to say that a lender with a mortgage running for 25 years will eventually turn out the winner of who makes the most money.

Consider that if we just take for example a 25 year $100,000 mortgage at a conservative fixed rate of 4%, the lender would eventually charge an accumulated interest of approximately $58,000.

That is a gross margin or 58%!

And it doesn’t take into account settlement costs, fees they might charge to affiliates for recommending their services to borrowers, or any savings they pocket should developers or sellers have an account with them making the whole transaction just a transfer of numbers. And that’s just stating the obvious.

No wonder lenders are so generous in paying referrers a referral fee or “gift” for referring borrowers to them.

This is why as soon as a borrower is on the market for a mortgage, be it a new loan or refinance, he will be flooded with parties trying to become his referral agent.

The common referral sources are:

  • Real estate agents
  • Mortgage brokers
  • Builders and developers
  • Online comparison sites
  • Customers
  • General public
  • Family and friends

The problem is can any of them be trusted? And who is most likely to help you find the best mortgages in the market?

Let’s take a closer look at all of them.

Real estate agents

The most intuitive source of borrower referrals will inevitably be real estate agents.

They are usually the first point of contact when people buy or sell houses. And with the rapport they build up over time with customers, they tend to have a lot of influence nudging customers towards certain lenders and loans.

Lenders tend to have referral contracts with agencies which will cover all the agencies’ agents.

Upon successful referral, referral fees (commissions) are credited into the agency’s account, which the agency will deduct a portion for the company and the balance issues to the agent in the form of a check.

However it must be noted that an agent’s goal is to close the deal so that they get paid for their agent commissions at the end of a real estate transaction.

While the financing is a tantamount requirement to close any deal, an agent has no preference whether it is from a loan, cash, or other sources.

This means that if a loan is required buy a buyer (which is the likelihood), an agent is only focused on a buyer obtaining a loan at the necessary loan to value for closing.

It doesn’t matter if it’s a good loan or one that should burn in hell.

This is why they usually only refer to bankers who they have worked with before and tend to have easy approvals.

And as we all know, easy approval loans, especially those with minimal documentation requirements are the most expensive ones.

If you are lucky, a banker they have the best relationship with will coincidentally have the best mortgage at that moment in time.

Otherwise, more often than not, a home buyer is not going to find the best loans catered to him from a real estate agent.

Most agents probably don’t even know how amortization tables are tabulated.

Mortgage brokers

While real estate agents make up the bulk of referral sources to lenders, mortgage brokers tend to send them the most volume per broker compared to per agent.

This is because the huge amount of real estate loans coming from agents is due to the thousands upon thousands of agents working around the clock for clients.

Compare this to brokers who might send lenders a third of the volume but with twenty times less manpower.

Moreover, they also send refinancing customers to lenders. This is lacking from agents who mostly only do new loans.

This is why brokers tend to yield enormous influence with lenders

Because brokers make it their job to be updated with latest loans and promotions, there is little doubt that they would know what are the best deals in town for a specific borrower.

The problem is whether they will reveal it to the borrower.

This is because they have no obligation to promote one lender or another.

You see, lenders know that a broker would have hundreds of loan packages in their folder to present their customers. And in order to entice brokers to give their loans more exposure, a lender might offer higher commissions to brokers.

This means that even though a capable broker on top of his game would know what the best mortgages are in the market, that particular loan program might never be shown to a borrower should the lender offering that deal not offer a broker an attractive referral fee.

A borrower can only blame the miser of a lender for not learning about their loans via a broker.

Yet even though it can be challenging to get brokers to show you the best rates, they still present the best chances of a borrower to find the best mortgages.

They have it listed right there on the computer screen facing them when discussing your credit with you.

If you can somehow convince them that they should help you, you will be able to identify the best loans you qualify for in a jiffy.

Further more, they are the real experts in home loans who are able to frankly discuss lenders as they have no loyalty to any.

You can actually have intellectual conversations with them about the economy, rate hikes, pros and cons of various lenders, the truth in how points work, increasing qualifying income, limitations of APR, how credit scoring really works, borrowing hacks, etc.

They are probably the only party among referral sources who can break down settlement costs to every detail.

On the topic of mortgages, there are no better experts to have an intellectual discussion with.

And let’s not forget that brokers have more leverage and negotiating power against lenders compared to all other referral sources.

At times, they can even help obtain deviated rates below the published rates of a lender.

Builders and developers

While being nowhere close to the volume of clients that agents and brokers can bring to a lender, developers and builders also provide significant business for mortgage lenders.

An average high-rise condominium project can easily consist of 300 to 500 apartments.

And all buyers are going to need financing one way or another.

But be mindful that the ultimate objective of a developer is to be paid.

They arrange tie-ups with lenders so as to help new home buyers obtain the funds to pay them for the purchases when closing date arrives.

When we put the prices of houses or apartments into perspective, it really doesn’t matter to a developer how much referral fees a lender is offering.

Sometimes, lenders try to exploit a developer’s influence on buyers by arranging tie-ups that are supposedly offering promotional rates.

Yet every time I see one of these “promotions”, I am aware of existing loans from other lenders offering a better deal.

Sometimes these promotions are not promotions specifically conceptualized for a particular development project at all as the same packages are freely available to the general public!

The odds of discovering the best mortgages from a developer’s sales office is as good as zero. With the exception of a coincidence.

However, the chances of a favorable LTV could potentially be higher.

A lender is not going to find favor from a developer should they be too stringent in approving loans for purchasing of a unit from particular project.

I’ve witnessed these occasions before.

Properties in an area which was classified as an undesirable neighborhood by all mainstream lenders always had their loans rejected outright by the big lenders. So it grabbed my attention when a particular development in the area had a tie-up with one of the big players. The project, even though residing in an undesirable geolocation became an exception for a big lender via a tie-up with the developer.

However, the loans being offered were not competitive with inflexible terms.

So the only realistic chance that you would come across the best property loans via a developer who is selling you the house in question, is if there were never any good loans to begin with.

So anything slightly better than the worse becomes the best.

Online comparison websites

I simply love the concept of online portals that allow borrowers to view a comprehensive list of aggregated home loans for a user to easily compare and choose from.

But most, if not all, of them do not deliver information pertaining to all loans from all lenders.

Don’t get me wrong. They do a pretty good job of assisting a borrower but they also practice preferential treatment to preferred lenders.

For example, even if you have keyed in all required information and presented with the most suitable loans you qualify for, a loan package being promoted can still be positioned on top of the list that does not meet your criteria.

On top of that, comparison websites tend to only publish standard interest rates with standard terms.

Try negotiating for deviations or better terms and you will never get anywhere.

Overall, comparison sites present a great overview of what is available in the market.

But it’s not likely that you will get the best rates and terms if you are a borrower with good credit.

In this case, borrowers with adverse credit might have a good chance of finding a very good deal.

On the other hand, they can be considered brokers as well. So if you manage to get personal attention from their officers, which is a long shot, you would stand as good a chance of getting a great mortgage as with a traditional mortgage broker.


Somewhere along the lines of crafting marketing strategies of their credit facilities, smart marketers started to think that their existing client base are their best advertisement tools.

Happy customers would after all, happily tell their friends about their loans.

Leveraging on the social network, lenders started to run promotions where existing customers could get a referral fee or a generous shopping voucher for referring their relatives and friends.

This is usually why you see links to lenders from your friends in your social news feeds. Or a friend who keeps pestering you to use his banker.

But the likelihood of getting the best loans from such sources are close to zero.

General public

When the referral program for customers mentioned above was extended to the general public, it has the same outcome.

The general public is, disturbingly, just a tool lenders use to grab more customers on the cheap.

It’s probably the worse source of mortgage referrals.

Family members, relatives and friends

With social media making network marketing so easy these days, there are a lot refer-a-friend programs initiated by lenders to urge customers to recommend loves ones to borrower from them too.

But these $50 or $100 shopping voucher rewards for successful referral is a weak attempt to entice family and friends to do the marketing for lenders.

The loans from such referrals are seldom great deals, if ever.

Ranking referral sources

I would like to conclude this by ranking the mortgage referral sources with #1 being the most likely to be find you the best loans, and #7 the least likely.

  1. Mortgage brokers
  2. Online comparison sites
  3. Builders and developers
  4. Real estate agents
  5. Customers
  6. Family and friends
  7. General public

However, don’t be misled by these rankings.

A mortgage broker probably has more of a chance compared with the chances of all the other six combined.