When you begin your search for a new home loan, one of the first things to consider is where you'll get the money. Your basic choices will be mortgage brokers and banks.
In order to understand the differences, let's look at how the lending process works in each case. Banks are given rates by their institutions, telling them what interest rates they can quote to their clients on any given day. There's only so much they can do with regard to interest rates, because it needs to remain profitable in order to stay in business.
1. Your local Bank.
Your first instinct may be to go with your local bank because you know them from doing business with things such as your checking and saving accounts. But you've probably also heard that mortgage brokers can get you a better interest rate, since we deal with hundreds of lending sources.
2. Mortgage Brokers
Mortgage Brokers have an advantage. They're not loaning their own money, and are free to "shop your loan around," looking for the best terms from various lending sources. They make their money by getting loans at discount prices and then marking them up, making money on the difference. Since they have many sources to choose from, they can often find loans at lower rates than most banks.
3. Correspondent Lenders
The third alternative, correspondent lending, combines the best features from both groups. Correspondent lenders are similar to mortgage bankers in that they make the lending decision and fund the loan with their own money or credit line. However, as soon as a loan has closed, it's sold to another lender at a previously negotiated price. It's the best of both worlds for you as a borrower. You'll be dealing with the company that will be funding your loan, and because we are able to shop the competition for you we can usually obtain you the lowest interest rates available.
About the Author
Shawn Gerhardson (NMLS #274129) is an active loan officer with Waterstone Mortgage. Email Shawn directly firstname.lastname@example.org, call at 763-691-0202 or click to get a free, no-obligation rate quote. You can also find Shawn on Twitter @Mortgageg and on Facebook Specialties: Purchase, Refinance, Debt Consolidation, Conventional, USDA Rural Housing, FHA,VA and MHFA Loans. Credit Repair, Relationship Networking, Direct experience with starting a networking group from the ground up.
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