Direct lenders provide loans to customers directly, without going through third parties. This gives a direct lender more discretion and control over the lending process. Many people think that they can save money by going to direct mortgage lenders instead of applying through mortgage brokers.
This is not true and getting a mortgage loan through a broker will not cost you more than approaching a direct loan lender. Mortgage brokers will charge you a fee, but so will loan direct lenders. A mortgage broker may charge the same fee as the lender or may even ask for a lower fee.
Mortgage lenders have different schedules of rates for borrowers and brokers. Brokers get lower rates, which are not offered to borrowers even if they approach the mortgage companies directly. That’s why brokers can offer you competitive rates that may be equal or even better than those offered by lenders.
Mortgage lenders offer these lower rates to brokers because they help them to screen applicants and to complete the paperwork. This helps lenders to save a lot of time and money.
Lenders claim that there have been more defaults in loans originated by mortgage brokers, as compared to direct lender loans originated by their own staff. Due to this, many of them are opting to deal with loan applicants directly.
Mortgage brokers contest this claim by saying that they only sell the loan products of the lenders and stick to their guidelines while processing applications. They say that the final decision to approve or reject a loan application is taken by the lender.
Brokers say that they encourage competition among lenders and help applicants to find the best deals.
If you are looking for a mortgage loan, it is best to research your options via the Internet and to talk to several brokers and lenders. Obtain quotes in writing from a few brokers / lenders and try to negotiate a better deal by asking them if they will provide better offers than those given to you by others.
Use an online mortgage calculator to assess your options. Check the credentials and reputation of the brokers / lenders, and read the fine print before you sign up.
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