Mortgage brokers don't make loans directly to buyers; rather,. A lender is a financial institution that provides loans directly to you. A broker doesn't lend money. A broker can work with many lenders. Compensation is one of the key differences between mortgage brokers and direct lenders.
Mortgage brokers are paid on a commission-based schedule. In most cases, the loan opening fee charged by the bank is paid to the broker. Unlike a mortgage broker who works independently, a loan officer typically works for a company. They are responsible for seeking customers for the bank or credit union and for developing relationships with these customers on behalf of the bank.
The decision to take out a mortgage with the help of a mortgage lender or mortgage broker is a crucial step in the homebuying process, and it's important to understand the differences between a lender and a broker when making a decision. The key difference between a mortgage broker and a lender is the work they do. A lender lends you money, while a broker helps you find and work with a lender. A mortgage broker acts as an intermediary between you and potential lenders. Unlike mortgage lenders, brokers don't finance loans themselves.
Instead, they work on your behalf to find the mortgage from several lenders that best fits your needs. Compare prices and talk to brokers and lenders to see who can offer you the best deal. Mortgage brokers don't anticipate loans, but they do offer a one-stop shop with access to multiple lenders, while a direct lender is a single entity that eliminates middlemen. Mortgage brokers offer customers a wide variety of mortgage options offered by banks, mortgage lenders and credit unions. A mortgage broker is an independent financial professional who acts as a liaison between you and the mortgage lender.
Just like looking for a lender, it's helpful to do your research when looking for the right mortgage broker for your personal and financial situation. As mentioned before, some lenders work exclusively with mortgage brokers and some brokers work exclusively with specific lenders. Skipping hiring a mortgage broker may mean going through the application process with more than one direct lender. Some lender sites, such as Rocket Mortgage, also have a search engine that will connect you to local mortgage brokers. Mortgage brokers can help you fill out your mortgage application and recommend the loan agent or lender that best fits your needs based on your income and credit profile. Mortgage brokers can also work with borrowers who have difficulty getting approved through the automated underwriting process from direct lenders due to recent bankruptcy, poor credit, or unstable employment.
A mortgage broker is likely to be more familiar with how different lenders handle mortgage applications and may be able to help speed up the process. Unlike mortgage lenders, brokers don't lend you money; they'll connect you with lenders and help you by looking at your credit history, verifying your income and work history, and using that information to apply for mortgage loans on your behalf. A mortgage lender is a financial institution or direct lender that provides the funds for a mortgage. In cases where the lender covers the commission, it is important to ensure that you do not opt for a more expensive loan, as it involves a higher commission for the broker.
Whether you turn to a broker or a lender, you should always look for the best loan terms and the lowest interest rates and fees. Investopedia's best overall choice for direct mortgage lenders is Quicken Loans, better known as Rocket Mortgage.