In 2019, there were 5.34 million homes sold in the United States.

If you’re thinking about joining all of these people in buying your own home, you may be wondering what the difference is between a mortgage broker vs direct lender.

Thankfully, we have all the answers for you, so keep reading to find out which would be the best choice for you!

Mortgage Broker

Mortgage Broker

A mortgage broker is a professional in finance who will act as a go-between for lenders and borrowers. They themselves aren’t lenders, and they don’t use their own funds to help you get a loan.

They’re more of the middle man to help you make sure that you’re getting the best deal. They will shop around for you and offer you all kinds of quotes from different lenders.

In order to make sure they find you the best choice, you’ll have to have an appointment with them first. They’ll talk about how much money you have and ask you what assets you have. They’ll get all the information they need to propose you as a potential borrower for lenders.

They may need documents like credit reports, pay stubs, income, asset listings, and tax returns. This will help them figure out how much you can borrow. They’ll take care of the communication and process for the application and approval.

If you find a good one, they should be able to give you all kinds of information that will help you make the best decision. For example, they can help you decide which mortgage to get and which ones to avoid. They can also tell you what home type would be the best purchase for you.

Instead of having to go to multiple different lenders on your own, you’ll only have to meet with one person and they’ll take the rest from there!

Pros

Many people decide to go with the best mortgage broker just because it saves them a lot of time and energy.

In some cases, they can even get you a wholesale interest rate that is lower than the regular retail interest rates. They know how to work the system and make it work in your favor.

You’ll also be able to have more options for choosing a loan. They likely have connections with all kinds of lenders and banks that you’ve never thought about applying for!

They’re also less bureaucratic and will get in contact with you a lot faster than a direct lender might. Because of this, you may be able to get the loan for your home even faster than you anticipated!

Cons

Be careful when you hire a mortgage broker and don’t buy into everything that they promise to do. A lot of them will make promises to get your business even though they know those promises are unrealistic.

And while they have a lot of great connections, they may not be able to get access to some loans that you would have access to.

Direct Lender

Direct Lender

On the other hand, a direct lender cuts out the middle man and will directly loan you the money. You’ll have to send your mortgage application to them because they are the sole lender.

You will work with them on the entire mortgage process, and you won’t have to go through someone else to do it. They’ll be able to help you process your application and give you a preapproval.

If you choose a fast lender, you could have a mortgage a lot faster than you think.

Pros

You won’t have to pay a middle man to do your business for you, and you may even apply for discounts depending on what savings or checking account you have.

You also get to build a relationship with the banker that is going to be loaning you the money. You may even feel more trusting of them since you know exactly who you’ll be dealing with.

If you already have an account set up with them, it’ll also be really easy to link all of your accounts to easily make your payments.

Cons

By only going off your research, you may only be able to find a small number of loan programs. It will also take a long time to apply for all of those loans, which can take a lot of time and lengthen the process if you can’t find one that you like.

They also don’t have to disclose how much commission that they will be making from doing business with you, so they could overcharge you as well.

Main Differences

Main Differences

Mortgage brokers get their money from you on a fee-based schedule. When you originate a loan, you’ll have a fee attached with it that the bank normally charges. The bank will pay that to the broker if you used them.

The fee could be any amount, but it really depends on how much the loan is. This can influence who the mortgage broker is incentivized to work with to get you a loan.

On the other hand, direct lenders make their money by all kinds of charges and fees. If you get a loan from a lender directly, they will collect the origination fee. They also make money off any interest, late fees, or related charges.

Learn More About the Difference Between a Mortgage Broker vs Direct Lender

These are only a few differences between a mortgage broker vs direct lender, but there are many more!

We know that buying a house can be a stressful time in anyone’s life, which is why we’re here to help.

If you enjoyed this article, make sure tha you explore our website to find more articles just like this one!

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