If you’re in the market for a new home, one of your first steps is to review your financing options and get pre-approved for a loan. This used to be a simple matter of walking into your local bank or credit union and applying for a mortgage, but with today’s demanding housing market potential homeowners need fast, easy and convenient home lending options to keep up with the market.
Today, there is a wider range of home financing options, including working with a mortgage broker vs lender. Let’s discuss the differences between a mortgage broker vs lender to help you determine which of the two is the best fit for you. To clarify, we will be discussing direct mortgage lenders, described in greater detail below.
What is a Direct Mortgage Lender?
A direct mortgage lender is exactly what it sounds like - direct. Instead of going through a middle-man to find the right lender, and service your loan, a direct lender will do everything in-house. From examining your credit to handing over the final check, a direct lender is your one-stop-shop for everything involving home loans.
Mortgage Broker vs. Direct Lender
Mortgage brokers serve as middlemen for a variety of different lenders. They match you with the loan that they believe best fits your needs. Once approved, you deal directly with the service provider or loan originator.
With a direct lender, you go right to the source. The person taking your application actually has a role in making the final decision and, in many cases, serves as an ongoing point of contact for your loan. Digital direct lenders save you even more time, money and effort with robotics taking care of menial work you would otherwise need to do yourself, which can lead to longer loan processing times and jeopardize your chances of finding that perfect home for you before other qualified buyers do.
In most cases, a direct lender is licensed to provide mortgages in most, if not all, 50 states. Many mortgage brokerage companies are only licensed in a few states, which can create issues if you are purchasing a property where the broker is not licensed. This also means that with a direct lender you have more opportunities to qualify for better direct lender loans that may not be in the same state or even time zone as you, giving you more options when it comes to buying a home with a loan that fits your needs.
A mortgage broker is bound by the guidelines set by the individual lender. The broker does not have the discretion to waive certain requirements in order to gain your business. A direct lender sets its own qualification guidelines, which means that it has the flexibility to waive them under certain circumstances. This helps when it comes to fees too, since direct lenders won’t have to charge hidden or junk fees to the borrower to make up for back-end fees. Speaking of which...
Every lender charges certain fees for processing a mortgage loan; however, the fees charged by mortgage brokers tend to be higher than those charged by direct lenders. This is because the broker has to charge fees above and beyond those charged by the lender in order to make money. This is akin to purchasing an item retail versus wholesale. Some less scrupulous brokers do not disclose all of the fees upfront in an effort to secure your business while padding their profits.
Read up on unnecessary lender fees at WhatTheFees.com
Comparing the speed of a mortgage broker vs lender proves to have a clear winner. With a direct lender, everything is typically processed in-house, and with the help of lightning-fast robotics and digital processes, catching mistakes and making calculations is done in the blink of an eye. This usually means a faster turnaround than with a broker who has little control over the processing of your loan and the disbursement of your funds. For instance, direct lenders are capable of beating the industry average closing time by 60 percent, thanks to digital advantages.
There is a common misconception that mortgage brokers are able to offer better rates than direct lenders. In reality, all mortgage rates are driven by what occurs in the secondary market, which means that every lender bases interest rates on similar information. Economic indicators like 10 year treasury and mortgage rates, for example, will have more implications for those looking to buy or refinance a home than a mortgage broker vs lender will. Any rate difference between a broker and a direct lender tends to be negligible at best and will likely have little effect on your monthly payment. In fact, direct lenders are able to offer competitive interest rates and extremely closing costs compared to brokers, which can have a big impact on your monthly mortgage payment. As you decide whether to work with a mortgage broker vs lender, be sure to ask about their closing costs. This move alone could save you thousands.
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While a mortgage broker may offer products from a wide array of different lenders, they may highlight the products that will garner them the best commission. With direct lenders, the loan officer typically does not receive a commission based on the rate or fees associated with your loan. This allows them to focus on securing the best loan option and rate for you, naturally providing excellent service above self interest.
At Wyndham Capital, we offer competitive rates on a wide array of loan programs. Our loan officers will take the time to understand your financial needs and goals in order to create a personalized loan solution. It is this commitment to exceptional customer service that has earned us the title of the "Nation's Most Referable Lender."
With the power of digital advantages on our side, Wyndham Capital Mortgage is able to offer the white glove customer service you’d expect with loan products, mortgage rates and low closing costs traditional lenders and mortgage brokers can’t touch. Our digital advantages serve you, making the entire process from application to eClose one you’d never expect to be so easy. Connect with one of our mortgage loan officers today to find out more on how a digital direct lender like Wyndham Capital can better serve you.
Want to avoid a mortgage bloated with thousands in extra fees?