Do You Need A Mortgage Broker vs Mortgage Lender-What is the difference…post updated 05-31-23
A Mortgage Broker can get the job done for you just as a Mortgage Lender. However, here we discuss the difference between the two will be discussed. The mortgage broker is regulated and must have a license, just like the direct lender (bank). It will be up to you to choose the Mortgage Broker or Mortgage Lender.
Both brokers and lenders have regular regulation reviews and since the mortgage crisis in 2008, the Consumer Financial Protection Bureau (CFPB) is the main controlling agent. The Federal Reserve has the power to regulate the banking industry (lenders).
Mortgage Broker
The mortgage broker is often called the intermediary. However, that does not mean that you do not get good service. It means that the professional with a broker’s office actually has a few more options usually than a direct lender has.
A broker Loan Officer has several lenders that he/she can work with and get the best mortgage interest rates that are trending. He/she will look at your application, what your needs are for your loan, and consult their list of lenders to see which one can best serve your needs.
How The Broker Works:
- Takes your application.
- Pulls your credit usually in one of the automated underwriting services of Fannie Mae or Freddie Mac. (DU or LP- respectfully).
- He/she will get the results of your pre-approval workup and see what additional documentation they may need to follow up on.
- After they are certain they can help you with your mortgage purchase or refinance; they will shop for the best lender to meet your needs. This will depend upon the product you need, the credit, funds for closing, the loan-to-value ratio, and all parameters of your mortgage application.
- The broker makes a lender choice; they will apply that lender’s guidelines, policies, and procedures to your specific loan. *Most lenders’ guidelines are in line with Fannie Mae, Freddie Mac, and FHA. They may however have more restricted with certain guidelines, for instance, a higher minimum credit score than the FHA guide may.
The Processing and Underwriting of The Mortgage File
- They process the entire file in their office. They may or may not underwrite and give the final approval. This depends upon what kind of relationship the broker has with the direct lender.
- The lender often does the final underwriting of the fully processed mortgage loan. When they have received the fully documented file; they will give the final approval.
The Closing and Funding of Mortgage File
- The broker will set up the file with the closing attorney/title company and pull the documents for closing.
- A lender will fund the loan directly. A broker does not fund the file and pays the seller. The loan closes in the Lender’s name.
- You will make your mortgage payments to the lender or whoever the lender has chosen to service the loan. Often, the servicing of a loan is transferred after closing.
The Mortgage Lender
The mortgage lender does everything from application through closing. Lenders are also designated as direct lenders, meaning approved by Fannie Mae, Freddie, and FHA. They often have private investors who will purchase the loans., and are licensed, and approved by all-controlling agencies.
- They will take your application,
- process your application,
- underwrite your application,
- close and
- fund the loan in their name
How To Choose Between Broker And Lender-
Who Closes the Loan and What to Expect -see this…info
There is no set rule for choosing a broker or a lender. This is entirely up to you. However, what is most important for you is that you choose a broker or lender that is knowledgeable. They need to be up to date on mortgage loan changes, and one who can answer your questions.
More importantly, any Loan Representative should explain to you upfront what to expect of them regarding your loan application. When you talk with them on the phone, they should give you a list of documentation they need to make a decision as to your pre-approval for a loan.
If you have a mortgage originator who is inconsistent with answers and cannot answer your questions, find another broker or lender.
