Many home buyers assume that “mortgage companies” are banks that lend their own money. In fact, that is not always the case; you may find that the company is a mortgage broker, a lending institution or a bank.
A banker is a direct lender; it lends you its own money or the money of people who have deposited into the bank, although it often sells the loan to the secondary market. If you walk into you local bank and talk to the loans officer or Mortgage Specialist, they’ll be loaning the banks money and working to create a profit from the loan.
A mortgage broker is a middleman; he does the loan shopping and analysis for the borrower and puts the lender and borrower together. Many of the lenders through which the broker finds loans do not deal directly with the public (hence the expression, “wholesale lender”). However, they will also shop the banks as well to find the best rate.
A bank can give you direct loan approval, whereas a broker gives you information second-hand. However, many banks are limited in what they can offer, which is essentially their own product. You’ll also find you need to do the leg work to find the best rate. You will need to apply at multiple banks and be approved by several, bringing offers back and forth to get the best interest and terms. In addition, if you present your loan application in a poor light, you’ve already made a bad impression.
A mortgage broker charges a fee for his service, however they rarely charge you the borrower, it is usually the lender who pays the fees and therefore the service is free to you. Mortgage brokers have access to a wide variety of loan programs. He also may have knowledge of how to present your loan application to different lenders for approval. As a borrower it is wise to have both a mortgage broker and a banker on your team.
Only you can answer what is the best choice for yourself. If you have a good relationship with your bank and the mortgage specialist you may not need the services of a broker. However, if you do not, then using a broker to shop for the best mortgage for you could save you thousands of dollars without cost a cent upfront.
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This article is written by Tara Lyons at http://www.taralyons.com You may reproduce this article as long as it remains intact with no changes including the contact information above.
