Choosing a mortgage can be very confusing. Do you want a fixed rate, adjustable rate, FHA, VA, 15 year, or 30 year mortgage? Which ones do you qualify for? Of course, you want to find a professional who is willing to help you find the best mortgage for your circumstances. Who you go to for help can greatly affect what type of loan you receive. So, who should you talk to? First you need to address the difference between mortgage lenders and mortgage brokers.
Mortgage lenders act directly with the funding source and vary depending on where their money originates. Direct lenders are a bank or a lender from a financial institution that work straight with the borrower. Correspondent lenders also work straight with the borrower, but they make loans in their own name and then sell them to larger lenders. Wholesale lenders work with mortgage brokers and loan lenders rather than directly with the borrower and sell the mortgage a few months later to another larger lender.
Mortgage brokers are the “middle man”. They act as independent contractors who hunt down financing options and match borrowers with wholesale lenders. They meet with the borrower, compile financial information (employment history, assets, credit report, etc.), determine their qualifications and best financing options, advise the borrower on choosing an option, and help them complete the application process. Once that is done, they pass the borrower’s information to the wholesale lender, who handles the underwriting and closing, and secures the funds.
Mortgage lenders work with the borrower starting with the information gathering straight through underwriting, closing, and securing the funds. Due to the direct access they have to the funding, mortgage lenders have more control over the process and are often the quickest option for securing a loan. However, mortgage brokers, who have access to multiple wholesale lenders, often have a wider selection than mortgage lenders, who are limited to their own funding source. No single lender or broker can provide loans in every category or for every need, but there are multiple lenders for different niches.
Now you know who you’re dealing with. So, how do you choose between the two? It really depends on what funding they can offer you depending on your history, the type of home you want to buy, and where it’s located. The best advice is to shop around, but try and stay local to where you are buying. Local lenders and brokers are much more accessible and easier to work with, which is very important for getting your home closed. We’ve worked with a number of reliable mortgage lenders and brokers in Wilmington, and would be happy to give you some names. Just give us a call at 910.202.2546 or visit our contact page. This is just one of the many services that we offer for free!