Written by Dawn Muñoz, Vice President of Home Lenders of Georgia.
When it’s time to buy a home determining who will handle your mortgage is an
important decision. As an initial first step, you will want to decide whether to use a
mortgage broker or a direct mortgage lender, so understanding the differences between
the two is crucial.
A mortgage broker is a financial professional who brings borrowers and potential
lenders that they have an existing relationship together. Typically, the broker will have
a conversation with the borrower to better understand their unique current financial
situation. They will review important information such as credit score, income, assets,
investments, and liabilities. In addition, the broker will consider the borrower’s future
financial goals and will make suggestions as to what type of mortgage may be best
as well as how much the customer can realistically borrow. They will work with the
borrower to comparison shop for a lender that is a perfect fit. A good broker will have
a network of lenders at their disposal, even for complex financial situations. Mortgage
brokers are paid based on fees. In most cases, the loan origination fee charged by the
lender is paid to the broker. It is important to note that a Loan Officer that works for a
mortgage broker must pass a national test and obtain their license and will be required
to take continuing education courses yearly to stay abreast of industry changes and laws.
A mortgage lender is a financial institution or private business that directly loans
money for home purchases and refinances. Some borrowers choose to go with a bank
they already do business with. Each mortgage lender will have its own set of rules for
each loan that may be different from what the current industry dictates. Borrowers
will need to fit exactly into those guidelines. Depending on the size of the lender, the
borrower may or may not have direct access to the person processing their loan. In
the absence of a mortgage broker, the direct lender keeps the loan origination fee in
addition to earning interest throughout the life of the loan.
The choice between a mortgage broker or mortgage lender is always that of the
borrower and while neither choice is wrong, it is important to weigh the pros and cons
as they relate to you personally.