Do you know your options when getting a Mortgageâ€? The 3 main choices when shopping for a loan are: Direct Lenders, Mortgage Brokers and Correspondent Lenders. So, which one is better for you? In this write-up, you will be able to compare them, evaluate each system, and better assess what could work for you according to your goals and financial situation.
First of all, not only should you be looking for the most competitive rates and lowest fees, but also for the lender with the quickest turnaround on paperwork, underwriting and approval. Knowing how each lender handles and processes your documents is of the outmost importance, as getting a mortgage involves putting together A LOT of paperwork for an Underwriter who will determine if everything is acceptable for the loan; and very often, in some cases more than others, this represents an incredibly time-consuming process.
The point here is that, besides the costs, you should look for a lending option that gives you the highest probability of getting approved and that also does not take forever! Remember, time is money and dates in purchase contracts are very important. Now to the comparisons:
- Sometimes more convenient as they have many branches in more locations.
- You might speak with the Loan Officer once and have to deal with their assistants or another processor the rest of the time. Your loan getting passed around is clearly not optimal.
- Since the entire process is handled inside the same institution, the Loan Officer can have good communication with everyone involved in the loan. However, this might not always translate into a quicker process, especially at national banks where they perform their underwriting at an out-of-town central office.
- The larger the lender, the more bottle-necks you might see.
- In depositary banks you could be just a number, as Loan Officers handle so much volume that many times they donâ€™t even care if you walk out their door without a loan.
- Many big banks lack severely in terms of their service and availability to you when need info and updates on your process.
- Some banks give incentives for existing customers that use their mortgage services such as rate or fee discounts. Also, some banks work with retailers to offer discounted mortgage services to their clients.
- They have much more options: a wide selection of products from several different lenders.
- As brokers are experienced with various lending agencies, they know which ones exhibit a higher approval percentages for clients who lack a solid financial history (also meaning better rates for lower credit scores).
- Because a Brokerâ€™s income is Commissions only, they are more motivated and committed to help the client and make the deal happen.
- Brokers work for themselves and not for a big bank, so their reputation is on the line. They want to provide great service and never let the client down. They usually also have better personal relationships with their clients.
- Unlike banks, Brokers have much less overhead, so they could be less expensive and give you a better deal on interest rates and/or costs.
- On the settlement statement, Brokers must disclose the money they are making from either you, the wholesale lender, or both.
- Unlike Mortgage Bankers, all Brokers must be licensed and certified in order to operate.
- Because they work as a middle-man, they will have limited or no access to the bank that is servicing your loan.Â As they do not share the same roof with the Underwriter, Brokers will have little input on the loan approval process (unless they have contact with an Underwriter from a lender that they constantly work with).
- Since Correspondent Lenders are a hybrid between Direct Lenders and Mortgage Brokers, they are able to provide the best of both worlds: many different loan program options and In-House underwriting.
Finally, not all Banks are equal and the same goes for Brokers. However, after reading this article it is easy to conclude that Brokers give their clients many more options and are also more likely to offer better customer service. A broker will be able to find the program that best fits your specific loan needs and can get you the lender who is most likely to approve you and get you the best deal. Remember Brokers have access to lenders specializing in various market niches that several other lenders avoid, such as loans to applicants with low credit ratings. Instead, a Direct Lender will either approve you or deny your loan with little or no alternatives.
Adrian Morales Dobrzynski