How to Go About Choosing A Lender

The choice is between using a mortgage broker and a mortgage banker. You figure that mortgage bankers might be a little safer, someone you know, while the mortgage broker is notorious for getting a lower rate, right? After all, doesn’t it make sense to get mortgage interest rate quotes from a mortgage broker who has access to hundreds of mortgage lenders? Sure. But that’s really a false choice. There is a group of mortgage bankers that can provide the same function as a mortgage broker yet still control the lending process. These mortgage bankers get their mortgage money from companies called Correspondent mortgage lenders. And they may very well be the best of both worlds.

Mortgage brokers don’t lend their own money; instead they find it for you. They’re not more expensive than a mortgage banker; at least they shouldn’t be, because mortgage brokers get loans at wholesale prices. After marking up the mortgage loan to a retail level, they make money on the difference. No different than any other wholesale/retail environment. Mortgage brokers have the advantage of shopping around for the best mortgage interest rate. Or maybe there’s a home loan program that only a few mortgage lenders have that the mortgage broker can offer.

Mortgage bankers don’t have the luxury of shopping around each and every day for the best mortgage interest rate on the planet. Instead, they rely on their company to provide competitive home mortgage interest rates for them to quote. No need to scour dozens of rates sheets; a mortgage banker’s rates are printed up every day for the loan officers to use. Are rates higher with mortgage bankers than with mortgage brokers? They shouldn’t be, or else they wouldn’t be mortgage lenders very long. But in the real world, there are times when a mortgage lender really wants to "buy" the market and price their loans below everyone else. mortgage brokers have the ability to shop, and shop they do.

There is a group that falls between a big mortgage banker and a mortgage broker. This new group is also a mortgage banker, because they make the lending decision, print their closing documents and fund the loan with their very own money or credit line. Once the loan is closed the loan is immediately "sold" to a Correspondent mortgage lender, a mortgage lender that agrees in advance to buy an individual loan from the originating mortgage banker. Correspondent mortgage lenders also price their loans at wholesale to these mortgage bankers to keep them competitive. The ability to control the loan process while at the same time being able to "shop" the mortgage just like a mortgage broker gives these mortgage lenders a competitive advantage.

Who are these mortgage lenders and how do you find them? Many times they’re smaller, regional mortgage bankers and not a national mortgage company. It’s hard to tell if a lending company is a mortgage banker or a mortgage broker by the name of their business. You won’t be able to tell by looking at their business card. That is unless they tell you. It’s possible to find this information by going to their website where their "About Us" information is posted. Or you may simply have to call them up and ask if they’re a mortgage broker or if they’re a Correspondent for another mortgage company.

Don’t think that finding the best rate means either going to your bank or going to a mortgage broker ... there’s an "in-between" that has the benefits of both. You can’t be guaranteed the absolute best rate just by finding one of these mortgage lenders, but there are tons of ’em out there. You may be doing business with one now and not even know it. Don’t be fooled into a "mortgage banker vs. mortgage broker" debate. There are other choices.

For more helpful mortgage tips on choosing a mortgage banker or mortgage broker, mortgage refinancing, home loans, reverse mortgages or a home equity line of credit, contact FreeLoanComparison.com today!

Last update: November 14, 2008