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Brokers Vs. Banks |
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The types of mortgage lenders include mortgage bankers,
commercial banks, credit unions, and savings & loans. Banks,
savings & loans and credit unions gather funds from their
customers through checking and savings accounts and
certificates of deposits. These funds are then used to make
loans. When these institutions make a mortgage loan, they
may decide to hold it in portfolio or sell it to secondary
market investors.
Mortgage bankers get their funds typically by selling their
loans in the secondary mortgage market. Although the loan is
sold shortly after funding, mortgage bankers may not sell
the servicing on the loan.
Mortgage brokers generate about 60% of all loans.
They have access to a variety of lenders and often offer the
most choice in loan programs. Brokers assist the consumer in
completing the application and loan selection process and
direct them to suitable lenders to fund the mortgage.
Besides, brokers can quickly place your loan with another
lender if your loan is turned down, or rates drop.
It is important to understand the difference between
mortgage lenders and mortgage brokers. As a rule, mortgage
brokers don't make a decision whether to extend you a loan,
and they don't actually make the loan. They work as
intermediaries between borrowers and lending sources.
However this fact does not mean that you are paying a higher
rate. Since mortgage brokers obtain their funds from a
variety of sources, they can even save you money by shopping
your loan.
Mortgage lenders usually have wholesale and retail
departments. Mortgage brokers obtain rates at wholesale
then quote you a rate that is usually less then the retail
rate which is what you get when you go directly to a lender.
Mortgage brokers are free to set their own pricing and may
markup wholesale rates differently.
When deciding on a mortgage broker it is important to choose
one that shops rates with a large number of lenders, has a
fair markup and good service.
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