When you applied for a mortgage a time that seemed so long ago, it was thought that you would go to your neighborhood bank, the place where you maintained your savings and checking accounts, to also receive your home loan. I’m not sure when exactly this changed, but it seems to have happened recently because the procedure is now much more current.
Although banks and credit unions still hold a sizable portion of the mortgage origination market, more market share is now held by businesses whose sole purpose is to originate mortgages.
There is a lot of money to be earned by the businesses that provide or find mortgages for home purchasers, not only on the interest but also on closing charges and other fees, as one might understand by looking at the number of rivals in the market. There are two main types of mortgage originators to consider when looking at businesses that specialize in mortgage lending: mortgage bankers and mortgage broker in Bend.
Let’s first examine the mortgage banker. You interact directly with the firm making your loan when you work with a mortgage banker. A mortgage banker is also referred to as a direct lender. The mortgage banker may not be a mortgage servicer, which means they won’t be the one to whom you finally pay your mortgage, but it is their underwriting judgment that determines whether your loan complies with the requirements for approval. Although mortgage banker is usually restricted to the products they will provide to consumers, many mortgage bankers keep connections with “wholesale” lenders so they can broker loans if a borrower’s request or borrowing profile does not fit their own mortgage loan offerings.
Mortgage banker underwriters typically base their decisions in the current mortgage market on the standards established by agencies (FHA, VA, Fannie Mae, Freddie Mac). The Mortgage Bankers Association of America is the trade organization that represents mortgage bankers.
Next, let’s examine the mortgage broker
Similar functions are performed by a mortgage broker and a mortgage banker, but in different ways. The mortgage broker has the luxury of choosing from a big pool of lenders for borrowers to find the correct fit and receive mortgage loan approval even though he or she is not a lender and does not have the final say in whether to approve or reject a mortgage application.
It is not totally accurate to claim that employing a mortgage broker results in a middle man effect (broker to lender to borrower) and then conclude that this effect results in higher costs for the borrower. Mortgage brokers don’t work with consumer loans. The majority of direct lenders, or lenders you can contact yourself, have a wholesale department whose main responsibility is to service the loans submitted by mortgage brokers.
These divisions, which are also known as wholesale lenders, provide pricing that is not accessible to the general public and enable brokers to compete on a retail level with mortgage bankers. It’s vital to note that a broker may be able to benefit from a wholesale lender’s occasionally unusually low pricing in order to increase your loan opportunities, but a mortgage banker would not.
In looking at the mortgage market, a broker is aware of a lender’s area of expertise both nationally and locally. Based on an examination of the borrower’s credit history, the broker can determine which lender might best suit the borrower’s unique requirements. When all of this information is gathered, the broker chooses a mortgage lender who will most likely accept the application based on its financial data and unique information. The broker performs all of the lender’s tasks, including checking your credit and employment history, setting up a title search, and hiring a property appraiser. Mortgage brokers that work in some offices are also lenders.
The National Organisation of Mortgage Brokers is a significant mortgage broker trade association. Any broker who wishes to become a member of the association must abide by its code of ethics and business conduct. On the association’s website, there is a section where you can look for a member broker in your neighborhood.
Choosing a mortgage lender or broker is a decision that can never be wrong on its own. As with anything, the quality is in the people, so asking friends and family for recommendations on a mortgage specialist is a good idea, though not absolutely necessary. This is especially true of individuals who have recently gone through the process.
