What is the difference between a Direct Lender and a Mortgage Broker?
In most situations as a client, you might not notice a difference between a Direct Lender (mortgage banker) and a mortgage broker. There are many trustworthy mortgage professionals geared toward doing the right thing. However, here are some of the differences between the two different mortgage professionals.
A mortgage broker is an independent mortgage professional who originates residential and commercial mortgage loans as a broker. Most mortgage brokers are independent contractors working for a mortgage broker company. It is the Mortgage Broker's job to find a direct lender who can process, underwrite and fund a home loan. The mortgage brokers rely on the direct lender to make final decisions on the loan approvals. In some cases, brokers are not allowed to lock a loan request until the loan documents are ready to be drawn. When working with a broker, you must carefully examine the Good Faith Estimate because they might not be able to lock in your rate the same day for you.
Most Mortgage Broker's receive compensation by way of commission which is based on a percentage of your loan amount. They usually are compensated by the direct lender 1 to 2 percent of your loan amount for brokering the loan. For example, a $400,000 loan amount at 2% would be $8,000 in mortgage broker fees.
Mortgage Banker or Direct Lender:
A Mortgage Banker, also known as a direct lender is the actual lender who will process, underwrite and fund the home loan in the company's name. The direct lender has the final approval decisions based on the company's guidelines. Direct Lenders can lock a loan at the beginning stage of a loan request unlike some mortgage brokers.
Freedom Mortgage is a Direct Lender with a complete team of mortgage professionals to assist you. We have in-house loan processors, underwriters, funders, loan shippers, and secondary marketing. Their goal is to close your loan on time.
It is our goal at Freedom Mortgage to keep our costs and interest rates low for our clients. Often times, we have mortgage brokers calling us wondering how we can offer such low rates to our clients.
The Mortgage Bankers at Freedom Mortgage are trained specifically to do the right thing for our clients. This is a part of our Transparent Responsible Lending!
All Mortgage Bankers should provide you with the following:
- Discuss and explain mortgage program options
- Informs you in writing, of lock-in options at the beginning
- Explain all documents of the loan application
- Provide a Good Faith Estimate which includes ALL the fees for a loan
- Explain the loan process, from application to closing
- Communicate with you throughout the loan process in a timely manner
- Coordinate the final closing of your transaction