Mortgage Broker vs Direct Lender: What's the Difference?
You're thinking about getting a mortgage and you wanna know should I go to a mortgage broker or to a direct lender, and really, what's the difference? Well, in this video today we're gonna answer that question for you.
The first option is a mortgage broker think of it like an independent contractor. They don't work directly for any one bank. Their job is to gather the information from the borrower, and then shop that loan, you know, your package, around to a bunch of different banks or mortgage companies to try to get you as the borrower the best rate and the best terms. Now in an ideal world that sounds great, but what ends up really happening is that person that you're dealing with, that mortgage broker, He's just the middle man. His job is just to collect documents, put together a neat package, and send it off to a bank. Realistically, if you have a question or if there's a problem, when you call that mortgage broker, it's already out of their hands. It's with the bank, underwriters, and the bank that ends up taking that file, they may not be local. They may be, you know, three time zones away, or they may have bad processes. So yes, they gave you a really, really low interest rate, but they're gonna make it a big pain all along the way. So, it really does depend on the mortgage broker that you're using, and what bank it ends up going with, and on how smooth the deal is gonna be. I've had a lot of nightmare deals where they're three hours behind, the bank is, and you just can't get any information from them, they're all backed up, they don't close on time. It puts your deposit at risk as a borrower, and it makes the whole process such a a headache when it doesn't need to be.
The other option is going to a loan officer at a direct mortgage company. So, these are independent companies that all they do is mortgages and the loan officer is a direct employee of that company. So their job, similar to the mortgage broker, they collect the file, collect all the documents that they need up front, but then it's their company who's reviewing everything. The underwriters work for the same company as the loan officer, the processors all work there, and typically what we end up seeing is a much smoother process throughout the entire transaction. And again, when it's your money on the line for your extra deposit, when you might not close on the house on your scheduled time frame because all your stuff is in a moving truck and the bank needs an extension of two weeks, it can really make the process very, very difficult. So you gotta make sure you're working with someone who's knowledgeable, reputable, and is a good company.
Either way you go, a direct lender or a mortgage broker, your interest rate should be very similar because they're pricing your interest rate based on your credit score, the amount of money you're putting down, things like that. So, the interest rate shouldn't be significantly different, but the transaction can be much more difficult than it needs to be if you're loan ends up going to the wrong bank, or if you choose the wrong mortgage company, or wrong loan officer. You wanna make sure you get someone who's reputable and it's a good company with good people behind the scenes.
If you need a recommendation for a good mortgage loan originator, we recommend a couple of great people. They're phenomenal, some of the best in the business down here in South Florida. Feel free to reach out, we're happy to give you that information any time. Thanks for tuning in. I'll see ya on the next video.