Direct Lender or Mortgage Broker - Most people think a mortgage broker is the middle man in a lending transaction and they think that by going to a direct lender they will save time & money. Mortgage brokers have access to multiple lenders and hundreds of loan programs. This gives the mortgage broker an advantage over the direct lender who can only offer you programs that they have.Mortgage brokers do not lend money. Most of them are firms providing services rather than loans. The lender is the one who provides the money to the borrower at the closing table. The lender also makes the final decision regarding loan approval.
One of the biggest benefits a broker is able to offer is that they are able to offer you the type of product that is best for you, given your current situation. They are not limited to a couple loan types that may only be best for a small percentage of the population.
Many loan officers working for brokers operate on a flexible schedule. They are often willing to drive to meet you at your home - even during the evening or on weekends. This flexibility allows for an entirely different level of service, and can make getting your mortgage much more 'hassle-free'.
A direct lender is generally not only limited to their specific home loan programs but they are limited to use the rates and pricing that their company offers and they also must use thier company's underwriting guidelines. A mortgage broker however is able to shop available programs and different underwriting guidelines to find something that may be more suited to your individual specific needs. Mortgage brokers are also able to shop different rates and pricing. Therefore, you can usually obtain the exact loan you are looking for with the rate that you deserve by using a mortgage broker, as opposed to maybe having to settle with something else from a direct lender.
Although some mortgage bankers have the capability to broker loans out to other banks, most prefer to sell their own loan products, because they can usually earn more in finance charges with their in-house mortgage programs. Mortgage brokers usually have no preference to which bank to submit a loan application to. There only concern is the loan program being right for the borrower.
Direct lenders work with retail rates. Mortgage brokers have access to whole sale rates. Often you can get a more competitive rate by working with a mortgage broker.
Banks - vs - Mortgage Brokers - Mortgage brokers do not lend money. Most of them are firms providing services rather than loans. The lender is the one who provides the money to the borrower at the closing table. The lender also makes the final decision regarding loan approval.
A morgage broker has the ability to utilize hundreds and sometimes even thousands of lenders. By having the flexibility to use so many lenders this gives the mortgage broker access to ten's of thousands of different loan programs and guidelines. In turn, this allows a mortgage broker to find the right loan for each and every individual client. Whereas, most lenders are only able to use one set of guidlines with limited loan programs.
If time is an issure a mortgage broker may also be able the lender who will be able to close your loan the fastest, which will take all the work out of a borrower having to call several different lenders with no guarantee of a closing date.
A Mortgage Broker is essentially a matchmaker between the lender and the client. The loan officer will match the best lender and program with each borrower.
A mortgage brokers main concern is finding the best deal for there client and not focusing on what bank the loan will go through. With a mortgage broker you also have the benifit of having access to the latest and most up to date loan programs. Most banks can only offer there in house programs which are generally limited when compared to a mortgage brokers wide selection.
It is a myth that it costs more to originate a loan through a mortgage broker. Because lenders give "wholesale" pricing to brokers a customer will normally pay no more or sometimes even less to use the services of a broker. When you consider that the cost is no different and the fact that a broker gives you much more to choose from than going straight to the bank it is easy to see why the majority of mortgage loans in the United States are originated by brokers.
Mortgage Brokers are bound by law to disclose all commissions paid to them. Major banks are not bound by law to disclose commissions, as well as many other factors associated with originating a loan. This can result in the borrower unknowingly being overcharged.
Some mortgage lenders do not have retail operations. Loan programs offered by this type of mortgage banks are not available directly to the general public. They are often loan products designed for home buyers who are in a complicated financial situation. Home buyers can obtain these types of home loans only through mortgage brokers.
Banks on the retail level may have unique programs available to the public, however will more than likely be limited when compared to the many loans programs available with a mortgage broker.
Why should I use a mortgage broker - A mortgage broker should be used because of the product availablility that they have. They can be your one stop shop for all of your home financing needs. They work with hundreds, and sometimes thousands, of different banks and lenders to find the program that is right for you. A mortgage broker, also called a loan officer, can generally assist with all credit types, all income types and all available loan programs types. Having one person or team of people taking care of and familiarizing themselves with all of your financial needs and your specific situation is much more beneficial than utilizing someone to buy your home, then someone else to refinance your home and then someone new to obtain a home equity line of credit. A mortgage broker should be your trusted advisor, an excellent source of information and a link to finding other qualified and trustworthy referral partners such as realtors, homeowners insurance agents, home improvement contractors, etc... Use of a mortgage broker obviously has tons of benefits. Over 75% of all mortgages originated over the past couple of years have been handled by mortgage brokers.
Your mortgage broker can provide you with many more options than a banker in most cases. Having access to all types of banks gives brokers more options. While a banker has to do business based on their specific bank rules.
Using a mortgage broker gives you flexibility in regards to how you can have your mortgage structured. A mortgage broker is no different than a banker in the terms of providing a service, however the difference is what service they can be provided. To go into your local bank and apply for a loan will generally cause you to miss out on some value added programs that are not available to you through that banks product line. The overall time of closing is no different with a broker or a banker, and there is not an approval advantage with going with a bank, and can most times go quicker and smoother with a broker. There are many lenders out there that do not lend directly to the general public and that is where a broker can help you find those programs and terms that will benefit you most.
Mortgage lending is not like it was twenty or even ten years ago. Lenders have split up into niches. Will the bank that you apply at cater to your niche? Maybe or maybe not. Wouldn't it be better to apply with a full service mortgage broker who can find the bank or lender that has the best program and rates for your situation?
A mortgage broker has to disclose the amount of money that they are making in Yield Spread Premium (also called rebate). Bankers do not have to do this. Would you like to know how much your mortgage professional is making off of your loan, or would you like to be left in the dark?
