Please be advised that no
one source is always better than the other. Every company is different
and individual borrowers have differing needs and preferences. There is never
any substitute for shopping around, checking references and meeting loan
officers face-to-face.
Mortgage
Brokers: Mortgage brokers have increased market share and now are
the single largest source for mortgage loans. A mortgage broker obtains
financing through the wholesale department of a lender.
Because mortgage brokers can represent many different lenders they often
have the most choice in loan programs. It normally does not cost you more to
use a broker. This is because lenders offer wholesale prices to brokers.
Mortgage Brokers then mark up the price and quote retail prices.
Because mortgage brokers have a wide range of programs they can often find
the best program to fit your needs. Many mortgage brokers are small
entrepreneurial firms that are flexible and willing to work with your demands
and schedules.
The key is finding a GOOD mortgage broker. There is little consistency
between mortgage broker firms. The difference in rates, programs and service
between mortgage brokers can be dramatic. The best way to locate and identify a
GOOD mortgage broker is:
- Ask if they are a member of NAMB
(National Assoc. of Mortgage Brokers).
- Ask for references. Check with the Better
Business Bureau or your local chamber of commerce.
- Ask your friends if have done business with mortgage brokers they are happy
with.
- Find out which mortgage brokers publish or advertise their rates daily.
This way you can monitor their rates.
- Use mortgage brokers on the Internet!! Support
electronic commerce and do business with companies on the 'Net. Let's build
that highway together!
Direct Lenders:
originate, fund and service your loan. Direct lenders are generally larger
organizations than mortgage brokers and better capitalized. Direct lenders have
fewer programs than mortgage brokers but may have more knowledge of the details
of their programs. The loan officer at a direct lender generally has better
access to underwriters (the people who approve loans) than a mortgage broker.
This may sometimes mean faster approvals.
Direct lenders may be:
- Mortgage Bankers
- Specialize in originating and servicing loans. They generally sell their
loans to investors like Fannie Mae and
Freddie Mac. Their underwriting
guidelines (rules to make loan decisions) are supplied to them by their
investors. Mortgage bankers may interpret these guidelines based on their own
lending philosophy.
- Banks
- Offer a wide range of financial services including mortgages. They
generally offer a few select mortgage programs. Banks may keep loans in their
portfolio or sell their loans. Banks may also work with other mortgage bankers
to originate their loans.
- Savings and Loans
- Generally offer portfolio-adjustable loans which are easier to qualify for
than most other loans. Many S&Ls offer reduced documentation loans that are
ideal for self-employed borrowers. Many S&Ls have started offering fixed
loans that are sold to Fannie Mae or Freddie Mac like mortgage bankers.
- Finance Companies
- Generally specialize in B and C paper loans for poor-credit borrowers, as
well as 2nd mortgages. They generally raise money by selling bonds or
commercial paper on Wall Street.
- Private Investors
- Like to earn high returns––so they typically invest in riskier
loans that banks do not want to touch. Most of these loans are based on equity
alone.
