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Mortgages - The Difference Between Mortgage Brokers & Direct Lenders Can be Hundreds of Dollars

Note:  Banks only service 30% of Home Loans - the other 70% is serviced by Mortgage Brokers and Mortgage Loan Officers - Not every one has A+ Credit

Benefits of a Mortgage Broker
  • Educates you on types of mortgages that meet your needs.
  • Will review your financial profile and counsel you on how to proceed.
  • Helps you prepare documents needed to apply for a loan.
  • Talks to loan officers on your behalf to anticipate and resolve any problems
  • Has more Lenders to choose from and can usually find a Lender regardless of your credit.
Disadvantages
  • Origination fee can run as high as a few percent of the loan amount. (This is an automatic if your FICO is low)
  • Risk that the person you choose is incompetent or not trustworthy. Beware of misrepresented rates and hidden costs within the mortgage.

 

Benefits of a Direct Lender 
  • Not dealing with a middle person, direct communication with the source of your loan.
  • Expedited processing because the lender has greater control.
  • Greater flexibility in underwriting your loan.
  • Access to special programs or rates that are only available via the lender.
  • Lenders generally have a cap on the fees they charge.
Disadvantages
  • A lender may have limited loan programs.
  • A given single lender probably won't have the lowest rate.
  • You need to do more research to find the best mortgage loan for your situation.
  • Less hands-on assistance with completing the application and other necessary paper work
Brokers are separate from the financial institution that actually lends money. A broker cannot actually approve or decline your loan application. Once a broker has qualified you for a loan, they can find you a mortgage that meets your needs.

The lender pays the broker a commission on the amount you borrow (typically anywhere from half a percent up to four or five percent of the loan amount). This fee may get passed on to the borrower as an origination fee or result in a higher interest rate.

Lenders accommodate brokers because they want more loan business and will pay a middle person a commission to get it. In addition, because loan brokers do a lot of the preparation work, lenders often save time when a broker is involved and some Lenders lower the points for Brokers

An established Broker has access to many direct lenders, hundreds of programs and can shop the market on the wholesale level. The customer will pay the lower end of current retail market.

 If one direct lender has a problem with your qualifications or their rates are too high, brokers can merely send your mortgage  to another lender for closing without any extra fees!

 A Broker works for YOU, not the lender.