Let’s face it, home buyers need help navigating the mortgage jungle, but it’s difficult to know who you are dealing with when mortgage companies focus on low interest rates with little more information.
Mortgage Brokers and Direct Mortgage Lenders both market their ability to find you a mortgage, but there are serious differences between them and what’s best for you.
Buying a home is likely the most significant purchase you will ever make and it’s important to know who you might be working with.
To do so, let’s discuss the major differences between Mortgage Brokers and Direct Mortgage Lenders, namely, whether you will have access to multiple lenders, mortgage fees and disclosures, and efficiencies.
Access to Lenders
A Mortgage Broker works with multiple lenders, which means that they will be able to shop around on your behalf for the loan that best meets your needs.
With estimates of over 7,000 lenders in the country, a mortgage broker may provide you with the best opportunity to find a mortgage even if you are in a niche that some lenders avoid, such as lower credit score, investment properties, higher debt, etc.
This competition should ensure that you are receiving the most competitive loan on any given day.
In comparison, Direct Mortgage Lenders do not shop around for the best lender that meets your needs, because they are the lender. If you meet the specific lender’s criteria for a loan, you may be in luck; however, if not, you may need to restart your mortgage loan search and begin the process all over again.
Mortgage Fees and Disclosures
Because mortgage interest rates are often based on what happens in the secondary markets, rates available to lenders won’t vary too much. However, the mortgage fees attached to those rates can vary greatly.
The government has made determining what the fees and costs are a bit easier with the passing of the TILA-RESPA Integrated Disclosures, or TRID. Since October 2016, all lenders, brokers, banks and credit unions in the US must use the same document entitled the Loan Estimate (LE). The LE allows you to see the fees and overall cost of financing (APR). This makes it easier to shop and compare loan options from various lenders and brokers. The LE replaces the old Good Faith Estimate.
Whether you choose a Broker or Direct Lender, be sure to ask about fees up front, and don’t be afraid to shop around!
Everyone can agree that the mortgage process is incredibly inefficient, regardless of whether you use a Mortgage Broker or Direct Mortgage Lender.
A Mortgage Broker can spend time trying to do too much on their own while a Direct Mortgage Lender may pass your documents through multiple hands in their own company increasing the likelihood of mistakes.
To cut down on inefficiency, we built a platform for Loan Officers, processors and other employees and contractors to use when processing a mortgage loan application. The Lender Portal keeps all communication, tasks and documents in one easy-to-use portal, making the lender or broker process the application much more efficiently and improving the home buying experience.
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