Buying a house is one of the most important decisions of your life, which is why you need to make sure you pick the right lender when applying for a mortgage. However, there are many different types of lenders, each offering different products and rates for your mortgage, so it can get overwhelming.
The first type of mortgage lender is a Direct Lender. A direct lender is a financial institution that originates, processes, and funds the loan all by itself. In other words, the company you work with is the one loaning you the money. Direct Lenders include big banks like Bank of Ireland, credit unions, and specialized financial companies that deal primarily with home loans and mortgages. An example of a specialized mortgage company like this is Quicken.
The second type of mortgage lender is a Mortgage Broker. A broker is the “middleman” that helps you find the best possible rate for your home loan. Brokers work with multiple mortgage companies and compare rates to find the best lender for your specific situation.
Now that you know the difference between the types of lenders: Which one should you choose for your mortgage? The answer depends on your specific situation. For example, if your loan is a straightforward transaction, and your credit, income, and assets are strong, you may be able to save time and money with a bank. With a bank, you have more control over your mortgage process. You get to pick the banks you work with and negotiate the rates and fees. Also, your bank will work with you from start to finish, as they are direct lenders. This can be especially helpful if your bank is a brick and mortar institution that you are familiar with. However, one drawback is that banks don’t have to disclose what they make on your loan, so you may end up overpaying for your mortgage. On the other hand, if your credit and assets are less strong, a broker might be the type of lender for you . Because mortgage brokers work with a variety of lenders, they have access to many different mortgage products and rates. This is helpful because not only can you go to one broker and compare many different loan programs, a broker will be more likely to know which lenders are more lenient to your financial situation, given your credit and income are less than ideal.
