The mortgage industry involves helping people who want to make big investments and accomplish great feats. The people who make this happen include mortgage brokers and direct lenders.
Though they work in the same industry to help people seeking mortgage loans, their roles are very different. A mortgage broker acts as the middleman between the borrower and the lender while a direct lender is the financial institution that determines whether you get the loan or not.
Mortgage Broker
When a potential house buyer is ready to buy a house, they may decide to hire a mortgage broker. As explained earlier, mortgage brokers are professionals who act as intermediaries between borrowers and lenders. Since they’re not lenders, they don’t have the funds to advance mortgage loans. What they do is meet with their clients to assess their situation and financial state. They sort out important documents and paperwork that’ll be needed to get a mortgage loan. These documents include income, tax returns, pay stubs, investments, and credit reports. These documents help to determine how much loan a consumer can afford to borrow.
After gathering these documents, they take them to the bank or a mortgage lender where it’ll be determined if they’re qualified for a loan. Mortgage brokers are the link between the borrowers and lenders during the mortgage process.
A good mortgage broker should be helpful to borrowers in regards to providing information on the best lenders in specific areas and locations, which lenders offer a certain type of mortgage and other crucial information.
Before you agree to work with a mortgage broker, you should check to see if their rates are competitive and not exorbitant. You’re free to choose to work with another mortgage broker if you’re not comfortable with their rate.
Direct Lender
A direct lender is a financial institution that provides the funds for a mortgage loan. They could be a private entity or a bank, however, their main purpose is to finance mortgage loans for interested borrowers.
Most borrowers prefer to work directly with a lender because this process is faster. There’s no middleman so they get every information they need directly from the lender. However, you can only work with a lender with whom you’ve had business relations already. This helps to build trust between you and the lender and helps you secure a bigger and better loan amount.
Nonetheless, you’ll have to provide all the necessary documents and paperwork to pass the application stage. So if a borrower has any questions regarding the application process they can ask the lender directly.
However, you should note that going through this process isn’t as easy as it seems. You’ll have to search for the best lender with the best rates all by yourself- which is what a mortgage broker is trained to do.
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