Working directly with the best mortgage lenders has a lot of benefits. In order to find the best mortgage lender for you, it helps to compare several different ones. Be sure to ask questions and always read the fine print.
A mortgage lender is a bank or financial institution that will offer and underwrite home loans. Each lender has its own specific guidelines in order to verify your ability to repay the loan. A mortgage broker sets the terms, repayment, and other aspects of the mortgage.
When you work with a mortgage lender, you aren’t going through a middleman to find the lender and servicer the loan. A direct mortgage lender does everything in house, from examining your credit to giving over the final check.
A mortgage lender can be your one-stop shop for everything involving your home loan. The mortgage broker is the middleman between the lender and you.
Brokers don’t control a lot of things, including the timeline, final approval, or borrowing guidelines.
Licensing: Many mortgage lenders are licensed to provide mortgages in all 50 states. If you choose to go with a mortgage broker, they are only licensed in a few states, which can create issues depending on where you want to purchase property.
Flexibility: A broker will be bound by the guidelines that each individual lender has. Brokers don’t have the discretion to waive any requirements in order to help you or gain your business.
However, a direct lender sets its own qualification guidelines, which means that there is more flexibility to waive them under different circumstances.
Fees: Even the best mortgage lenders will charge fees to pay for the processing of the loan. The fees charged by a broker will usually be higher than those charged by a lender. The broker has to charge fees above and beyond those that are charged by the lender in order to make money.
The best example of this is purchasing a retail item versus a wholesale item. The retail item is going to have more of a markup. Some bad brokers will even not disclose some of the fees upfront in order to get your business but still pad profits.
Speed: With a mortgage lender, everything is processed in house. This can usually mean a quicker turnaround time. A broker won’t have any control ore the processing of the loan and when your funds get disbursed.
Rates: There is a myth that brokers can offer better rates than a direct lender. All mortgage rates will be driven by what is occurring on the market. This means that every lender will base interest rates on the same information. Any rate difference between a lender or a broker will usually be negligible and not have a big effect on a monthly payment.
Better Service: A broker will highlight products for different lenders, but they may only be highlighting the products that will give them the best commission.
With a direct lender, the loan officer doesn’t receive a commission based on fees or the rate associated with your loan. This means that the loan officer will instead focus on just securing the best rate and loan option for your needs.