In a time that seems so long ago, when you applied for a mortgage, it was assumed you would go to your local bank — the institution where you kept your savings and checking accounts – to also obtain your home loan. I can’t exactly put my finger on the period where this changed as Mortgage Broker got into the business.
As one can imagine by looking at the number of competitors in the marketplace, there is a lot of money to be made by the companies that provide or find mortgages for home buyers, not only on the interest but also on closing costs and other fees. When looking at companies specialising in mortgage lending, there are two basic categories of mortgage originator.
Mortgage Banker and Mortgage Broker.
Let’s look at the mortgage banker first. When you do business with a mortgage banker, you are dealing directly with the company making your loan. Often the term direct lender is used to describe a mortgage banker. The mortgage banker may not be a mortgage servicer, meaning they are not ultimately going to be the company where you make your mortgage payments, but it is their underwriting decision to determine if your loan meets the guidelines of approval. Yes, banks and credit unions still have a large market share for mortgage origination, a larger chunk of market share is now occupied by companies whose business is specifically to originate mortgages.
Next, we will look at the Mortgage Broker
A mortgage broker serves the same needs as a mortgage banker but in a different manner. The mortgage broker is not a lender, does not make the ultimate decision to approve or decline a mortgage application but has the luxury of drawing from a large pool of lenders for borrowers to find the right match and obtain mortgage loan approval.
To say that using a mortgage broker creates a middle man effect (broker to thelender to theborrower), and to then assume this effect creates more cost to the borrower is not entirely fair. Mortgage Brokers do not deal in the retail world of loans. Most direct lenders, lenders that you can access on your own, have a wholesale department with the sole purpose of servicing the loans sent in by mortgage brokers. These departments are commonly referred to as wholesale lenders, and they offer pricing that is not available to the public and allow brokers to be competitive on a retail level with mortgage bankers. I think it is important to point out that on occasion, a wholesale lender will price unusually low to beef up their pipeline of loan originations and a broker can be in aposition to take advantage of this for you whereas a mortgage banker wouldn’t.
Whether you choose a mortgage banker or mortgage broker, you can’t be wrong in that decision on its own. As in anything, the quality is in the people, and it is then agood idea, no essential, to ask friends and relatives, especially those who have recently gone through the process, to recommend a mortgage professional. http://www.mortgagebroker247.com.au