When shopping for your mortgage, you will likely come across 2 different types of companies. Mortgage Brokers and Mortgage Lenders. What is the difference? Which one is better?

 

Mortgage Broker : A mortgage broker acts as a middle man in the mortgage transaction. Think of them the same way that you think of a travel agent. They have access to a variety of service providers and an array of products. The mortgage brokers job is to find the right lender for you. This does not just mean the lender with the best interest rate. Maybe your credit score is 630, a mortgage broker will know which lenders will accept a score that low and place you with the appropriate lender. They will also know which lenders have the best interest rates on a given day. Those are the primary advantages of working with a mortgage broker. The disadvantages are that your transaction will typically take much longer. Brokers have to send your file to the lenders underwriting center and then wait for a decision. They must satisfy all conditions of the loan approval and send those in and wait again. The back and forth takes time, lots of time. If you are buying a home and need to close quickly, this is a very big deal. Brokers will typically have higher fees. This is because your loan is being processed twice. Once by the lender and once by the broker.  With the new regulations, the mortgage broker business model is becoming less viable everyday. In 2005, I would have advised utilizing a mortgage broker. Today, working with a Lender is a more prudent choice

 

 

 

 

These guys are lending there own money. The result is a faster, more efficient loan process.Your loan officer has direct access to the underwriter, instead of sending the file out of state to be underwritten. The downside in going with a direct lender or a bank is that you will be limited to the products and INTEREST RATES that they offer. They may not have the loan product that you need or the best interest rate. That is why I reccomend working with a Correspondent Lender.  These lenders are a hybrid between mortgage brokers and direct lenders. Correspondents often have several different lenders to work with, which gives them the ability to offer the most products and the best interest rates. Correspondent lenders do have IN HOUSE underwriting, which will give them the speed and efficiency of a direct lender.  I used the travel agent anology earlier and I think that fits for this.  A mortgage broker is like a storefront travel agent - they will do the job, but not the most convienent and you can typically find a better deal elsewhere.  lender/bank is like going directly to the US Air (they will get you where you want to go, but maybe not at the the price or time you want), a correspondent lender is like Expedia, they have all the speed and convienence of going directly to US Air they also will give you several other options to choose from. For my money, I always go to Expedia first.