The mortgage industry is comprised of companies and individuals that assist people in getting home loans, namely mortgage bankers or direct lenders and mortgage brokers. Although they both provide the financing that prospective home buyers need, they are quite different. The direct lender or mortgage banker is a bank, credit union, or financial institution that determines if you qualify for a home loan and hands you a check if you do. Conversely, a mortgage broker is the intermediary or middleman that finds the best lender for your situation.
Mortgage Bankers / Direct Lenders
Mortgage bankers or direct lenders provide mortgage loans. They may be banks, credit unions, other financial institutions, or private lenders. In some cases, direct lenders may be private companies that deal exclusively with the financing of home mortgage loans. You’ll commonly find these types of lenders online. In numerous cases, borrowers often choose to do business with someone whom they’ve done business with in the past.
Although it’s not a guarantee, having a long-term relationship with a mortgage banker or direct lender may help you acquire a better or larger loan and, in many cases, a better interest rate. The application process is the same whether you choose to do business with a mortgage banker/direct lender or a mortgage broker. You fill out an application, provide them with the required documents, and wait for the loan to be approved. If you need assistance, you can always consult with us.
In the simplest of terms, a mortgage broker is the middle man between a lender and the prospective home buyer. They are federally licensed companies or individuals who sell a mortgage banker’s or direct lender’s loan programs. Mortgage brokers DO NOT lend you the money for a home. They help you obtain a home loan through mortgage or retail banks while trying to match you up with the one that can provide the best interest rate and terms. They help you at every step so that the whole process of buying a home becomes simpler.
At that point, the lender determines whether or not they should underwrite the home loan and at what rate and terms. The advantage of using a mortgage broker is that you have a choice of lenders to do business with. This can save you lots of time when you consider it eliminates having to drive all over town to visit with multiple lenders. Plus, you won’t have numerous hits on your credit score since they will only visit a single lender in order to get the best rate and terms.