If you’re in the market for a new home, one of your first steps will be to get pre-approved for a loan. Your home financing options can include working with a mortgage broker or a direct lender. There are some important advantages to working with a direct lender that you should consider when deciding which financing option is best for you.
Middle Man vs. Actual Lending Source:
Mortgage brokers serve as middle men for a variety of lenders and match you with the loan they believe best fits your needs. Once approved, you may deal directly with the service provider or loan originator. With a direct lender, the person taking your application has a role in making the final decision and, in many cases, can serve as an ongoing point of contact for your loan.
Flexibility:
A broker is bound by guidelines set by the individual lender and they do not have the discretion to waive certain requirements to gain your business. Direct lenders set their own qualification guidelines which means that they have the flexibility to waive them under certain circumstances.
Fees:
The fees charges by brokers tend to be higher than those charged by direct lenders, because this is how they make their money. It’s the same as purchasing an item retail versus wholesale.
Speed:
Working with a broker who has little control over the processing of our loan and the disbursement of your funds, usually means a slower turnaround. With a direct lender, everything is typically processed in-house, meaning a faster turnaround.
Rates:
Many people have the misconception that a broker can offer better rates than direct lenders. The reality is that rates are driven by what occurs in the secondary market. Which means that every lender bases interest rates on similar information.
Lastly, with direct lenders, the officer typically does not receive a commission based on the rate or fees associated with your loan. This allows them to focus on securing the best loan option and rate for you.