| Will a mortgage broker or a direct lender get you the | | | | and loan companies and mortgage companies that |
| best deal on home financing or refinancing? | | | | they "broker" their loans to, similar to a stockbroker or |
| The key is to understand exactly how direct lenders | | | | independent insurance agent. In fact, almost every |
| differ from mortgage brokers? | | | | major direct lender you have ever seen an |
| Direct lenders loan their own funds and are, in theory, | | | | advertisement for has a wholesale loan division which |
| capable of making the final approval or denial decision | | | | offers better interest rates to mortgage brokers than |
| on your application. Banks, private lenders, and | | | | their own retail division can offer. At the very least, the |
| mortgage bankers will fall into this category. The direct | | | | mortgage broker can almost always offer at least the |
| lender will usually have a specific list of mortgage | | | | same rates. Many lenders will point out that brokers |
| programs to offer. In theory, your mortgage will be | | | | receive extra money called "Yield Spread Premium" |
| processed (documents will be gathered, verified) and | | | | from lenders and are therefore "overcharging". |
| underwritten all "in-house". The reason that these | | | | Mortgage brokers do receive a portion of their |
| capabilities are "in theory" is that many if not most | | | | compensation this way, but those lenders never point |
| direct lenders will farm out the mortgage process to | | | | out that on average borrowers receive lower rates |
| their retail division of loan originators and processors | | | | and fees from mortgage brokers. Since a mortgage |
| who will have to prepare and submit your loan to a | | | | broker does business with many direct lenders |
| team of overburdened underwriters who are | | | | throughout the United States, they can: |
| constantly running three or four days behind. In addition, | | | | * Send the loan to many different underwriters |
| these lenders will rely on large credit lines put together | | | | (providing a backup plan should one option not work |
| by Wall Street financiers in order to provide the funds | | | | out) |
| they use to close your loan. I am sure you have seen | | | | * Shop for the best rates and programs from major |
| many recent news reports about major lenders | | | | lenders and specialty shops |
| suddenly shutting down when they lose these credit | | | | * Save you money by having access to wholesale |
| lines. In the end, if you fit the guidelines for the lender's | | | | interest rates. |
| programs you are approved. However, if your situation | | | | Therefore, in my opinion, the best choice is to find a |
| falls even slightly outside the lenders standard | | | | mortgage broker you can trust, who will provide you |
| guidelines, your mortgage will be denied. And the lender | | | | with all the information you need to make the best |
| will have no further options. | | | | decision about how to obtain the mortgage best suited |
| A mortgage broker has many different banks, savings | | | | to your personal situation. |