Mortgage Products
Differences Between A Direct Lender And A Mortgage Broker
Getting that perfect mortgage for your new home is always made better when you know that you got a good deal on it. It is always comforting to find out that you are still happy with it even some time later. The way to find that perfect deal, though, could begin with something as simple as making a choice between a direct lender or a mortgage broker. Here are some thoughts to show you why one may be better than the other.
Before any of the differences are looked at, there are some things that are common to both. The first thing, though this might surprise some, is that both are usually paid on a commission basis. While it is often pointed out that mortgage brokers only get their money from the actual sales of mortgages, the same is true of loan officers at a bank. In other words, both have the exact same motive for helping you – they want to make a living, and, they both get a portion of the cost.
This makes it so that both of them are operating on the same principle – more sales equals more money. Other than that, both of them will draw from various mortgage products and both will try to fit the client with the best mortgage product that they have at their disposal.
The Differences
Now, for some of the differences. Here is where you will find a much larger field, and it is one that will bring about a large difference.
?The Products Available
A loan officer is simply the front man for an organization – the bank. He or she is the one that you will deal with when seeking a mortgage. Since they are essentially an employee of the bank or other lending institution, they will can only receive money when they sell that particular company’s mortgage products. To put it plainly, they can only show you the products they are given – from one company. Although there may be a rather large number of products, they are limited as to what the company offers.
A mortgage broker, on the other hand, would have at his or her disposal, an extremely wide selection of products because they regularly deal with many companies. In fact, a mortgage broker can represent a couple of hundred different companies, and therefore would be able to offer many hundreds of different mortgage options – possibly even thousands of options.
?Level Of Commitment
Another difference between a direct lender and a mortgage broker is the matter of his or her personal interaction with you. Now every person is different, but generally, you will find that a direct lender will be much more business-like in his or her demeanor. It will be more of an official visit.
A mortgage broker, on the other hand, will usually be much more friendly, relaxed, and personable with you. They honestly value your business and they will usually let you know it. It would not be unusual if a broker even visited you in your home to go over some details or talk with you some more. They often give you more time to talk person-to-person than a lender will, and they will be very glad to take the necessary time to make sure you understand all the details.
Apart from this, a direct lender may not be as committed to you as a mortgage broker. A loan officer knows that people will come to the bank looking for loans simply because it is a bank. They can get by with doing little and there may not be a lot of incentive on the part of the loan officer to go an extra mile for you. The reputation of the loan officer is not the same thing as the reputation of the bank. With a mortgage broker, however, his or her reputation is the business. They want your business and will often work hard to find a mortgage product that is suited to your needs. They know that a satisfied client will speak for their business in years to come – especially if you know a lot of people.
?Greater Options
In most cases a direct lender, especially one that has been in the business a while, will often stay away from certain loan products. This will tend to make their products better for people with good credit and a strong ability to repay the mortgage. This makes the loan officer extremely limited because most of their products (if any) may not be suitable for those who have less than good credit. The interest rate of a standard lender for this type of situation would make the interest rate too high for most – if a loan could be extended at all.
A mortgage broker, though, regularly deals with people in this situation and quickly knows which lending agency to call on that could provide a mortgage at a better rate for someone with a lower credit score.
?Better Deal
A direct lender is more likely to give you a deal without being able to provide much of a leeway when it comes to interest rates or extra fees. The lending agency itself would set these fees and the interest rate based on certain parameters and the loan officer usually is not able to vary much from it – except upwards.
Once again, though, because the mortgage broker is dealing with many companies, and each lender he deals with knows it, they will provide (in many cases) a greater flexibility for him to vary several factors – thus often resulting in a slightly better deal.
Advantages Of A Direct Lender
While there are certainly a number of advantages that do make the mortgage broker appear to be the better way to go, there are also some things to consider that may point the other way. One thing that could make the bank officer a possible better way to go would be if you already have a mortgage with that bank. It is possible that, since they already have your paperwork in this case, that you may be able to save on a lot of the expense of either remortgaging or getting a second mortgage. It also may be better because many lenders will give you a discount if you have more than one loan with that bank.
Another possible advantage is that a broker may contact a lender in other parts of the country. This could tend to slow down the mortgage process if they are not familiar with the various reasons of why a house in your area may cost more, and be worth more in your area than in another. They would have to take the time to search out the matter satisfactorily, which could delay your mortgage – and possibly set back the closing date. A local lending institution would already know the values of buildings in that region and would not have difficulty with it.
How to Choose a Mortgage Lender
Choosing a mortgage lender does not have to be a difficult task, but it does have to be a task that you take very seriously and make serious considerations about before you do it. Mortgage lending is done by a number of different people in today’s world and that is the reason why you must be careful; some people are good, some are bad and it is the careful consideration and shopping around for comparisons that you do beforehand that will ensure that you work with a mortgage lender that is good for you. While all mortgage lenders are different and offer different products, the ideal mortgage lender for you will have a number of different characteristics.
Experience
A good mortgage lender will have experience in handling people that are just like you. In today’s age of the internet, it is impossible for a person to have a lot of experience as a mortgage lender without someone having written a review about them. Whether you are talking about a specific bank or else you are talking about a specific individual that is an agent for other lending activities, you are going to be able to find something online about them if they have a lot of positive experience with clients. You can even ask them right away for testimonials from clients they have had in the past and cross-reference the two pieces of information to get an overall view of just how experienced they might be.
Skill
Mortgage lenders are essentially people that are supposed to make you feel good about the mortgage that you have. This means that while part of their job is educating you on the mortgage products and options you have available to you, another large part of their job is in the field of making you feel good and confident about the mortgage product that you pick. This should be regardless of whether you follow their advice or not. Therefore, a good mortgage lender, regardless of the decisions that you make, will be courteous to you at all times and will make you feel very good about the decisions that you make. If your lender does not do this, then you need to be wary about continuing with them because quite often there is a link between someone’s ability to make you confident and the confidence they themselves have in what they are saying.
Options
Lastly, a good mortgage lender will be able to offer you options. Most mortgage lenders work for a specific company, so this really has more to do with what the company has to offer rather than with what the lender has to offer and that is why it is down here at the bottom of the list. Options are usually given everywhere, but the places that you are likely to get the best options are from places like big banks. If you can get good mortgage options from a particular bank and then find a mortgage lender agent that possesses experience and skill, then you are going to be in a good position to make sure that you end up with a mortgage agreement that is truly good for you.
Choose the Right Mortgage Lender for your Home Loan
Banks used to be the place that those looking to buy a home would go for it but not anymore. Now there are many more options besides getting your mortgage through your bank or credit union. And nowadays you do not even need to have good credit!
Many people still prefer mortgage banks because they can get their loan direct from them and this simplicity is sought after. When you get one of these mortgage it is those at the bank that will go over your application carefully and then make the final decision about whether it is going to be approved or not.
There are some definite benefits of choosing a mortgage from a mortgage bank and one of the biggest draws of these banks is their reliability. These banks are watched by the federal government and they have regulations that make them trustworthy.
It is also nice to work with mortgage banks because you get your loan straight from them. This means you can get your questions answered accurately every time and you can also save money on different mortgage fees and costs since there is much less work on their end. And if this is a bank that you have business with in other areas they might even be willing to give you better terms on your mortgage loan. You will find that these types of mortgages are often faster to get than some other loans.
The only possible drawback to getting a mortgage bank loan is the fact that some of these banks have limited choices in the types of mortgage that they offer. These banks have their own programs and this is about it.
Mortgage brokers are another way that many people choose to go when they need a mortgage loan. Mortgage brokers are middlemen and they often will try to sell you mortgages from different places since they are not often affiliated with just one bank or other financial institution. These brokers will go through all of the mortgage products on the market to find the one that suit you and your situation the best.
Mortgage brokers are good because they offer such a wide variety of different mortgage products to you. You will have the choice of many different lenders and types of mortgages. And since these brokers have so many products at their disposal they can help you to find the perfect mortgage. They can actually help people who would normally not be ale to get a mortgage get approved for one. And most importantly since the mortgage broker does the shopping for you, you can save a lot of time and energy working with one.
Mortgage brokers are not all wine and roses however, for example some will hit you with hidden charges. Learning about loans before you apply for one will give you a good edge. And be careful of the mortgage broker that you choose because they do not have to be licensed in order to do what they do.
The majority of banks will not offer you many options as to the type of mortgages that you can get from them. And even these are often farmed out to other lenders on they secondary market.
It is getting more and more common for construction companies and homebuilders to offer their own mortgages to customers. They work in conjunction with mortgage companies or brokers in order to make things convenient for both them and the customers.
Online lenders are getting into the mortgage market in a big way. You can get a loan online quickly and easily no matter where you live. And the rates on these loans are often quite astounding.
So which lender should you choose? Good question. Lets break it down. If you have great credit and you have been working at the same place for a long time then a mortgage from an online lender is a good choice for you as is a mortgage bank. As long as they see you are reliable you will do well with them and get good interest rates. Banks are also good for people who have more than one mortgage. If you own other properties for instance.
Mortgage brokers are good for people who are their own boss and who don’t like to share any more financial information than they have to. And if your primary concern when it comes to getting a mortgage is the speed at which you can get it then you should talk to home builders and real estate company lenders because they can get you one the fastest.
There are some other things that you can do to get the right mortgage for your situations. Asking your friends and family member how they fared with their mortgages is a good start and always check out the credentials and the certificates of the lenders that you are thinking of choosing. You can even check with your local Better Business Bureau to see if there have been any complaints against the company or bank.
Take some time to learn the ins and outs of mortgages before you make your final decision. This can keep you from getting taken advantage of. Don’t get sucked into something that sounds too good to be true. Check into everything before you sign off on it.
Some lenders will try to take advantage of borrowers so take care in all of your decisions. You need to be working with a trustworthy and reliable lender, not one who is not on the level. Peak season is the most important time to be careful since it is at these times that bad lenders will try to take advantage of you. They will lie to you about their rates or even hit you with extra costs and tons of hidden fees.