Banks vs. large mortgage companies vs. mortgage brokers… The number of home lending options can be overwhelming! It’s easy to get confused and frustrated as you try to navigate this process. There’s many more places to get mortgage specific information if you’re still confused, such as Amerinote Xchange.
To help soon-to-be homeowners across the US, we’re clearly laying out everything you need to know about the different mortgage entities in this article. If you’re looking to get a mortgage pre-approved, you can learn more from SoFi.
First, let’s discuss the two main groups:
Lenders encompass banks and large mortgage companies. These are the financial institutions that work directly borrowers. As a homebuyer, you would go straight to one of these banks, after you’ve researched and found the house you want on sites like https://www.williampitt.com/, you will then work with a loan officer, get approved, and receive funding directly from them.
Brokers serve as middlemen between borrowers and lenders. Brokers help homebuyers fill out financial documents, loan applications, etc. but then submit their files to a variety of lenders. Once a mortgage is completed and approved, the chosen lender pays the broker a commission fee for the deal.
Working With a Broker
The primary advantage of working with a broker is their access to a whole host of different lenders. Also, some are able to tailor the kind of mortgages you seek to you; for example, if you are a physician and are looking for mortgage loans for doctors, brokers like LeverageRX specialise in exactly that. A mortgage broker’s job is to provide a one-stop-shop without the need to go from bank to bank. In addition, mortgage brokers may be better suited to work with people who have difficulty qualifying for a loan or have complicated financial situations.
The major downside to mortgage brokers centers on objectivity and fees. Since lenders pay brokers a commission (and not every commission is the same), brokers may steer borrowers in a direction based on their own financial gains. This situation is just something to be mindful of.
Working Directly With a Lender
In many cases, the best mortgage lender may just be the local bank a borrower already has a relationship with. In other instances, borrowers may have to shop around to see which direct lender will give them the best rate.
By working directly with lenders, borrowers cut out the middlemen, thereby increasing transparency, decreasing conflict of interest, and potentially lowering costs (cutting out the fees that would otherwise be paid to brokers).
The primary downsides of lenders include stringent requirements and fewer options. Since each individual lender might only have a few loan options available, borrowers would need to apply individually to many different lenders to have the same number of options a broker would provide – this can be complicated and time consuming. Not to mention direct lenders often have tighter requirements than brokers.
Time and time again, we’ve found the best option for new homebuyers is to spend a little time comparing options. Examine rates from mortgage brokers as well as direct lenders to see which might work best.
We have lending experts on hand to answer questions, so please don’t hesitate to reach out: email@example.com or (305) 921-0972.