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Bank or Broker?Many people are not sure what the difference is between a Bank, Mortgage Bank and a Broker. A Bank and Mortgage Bank are very similar. They both self fund the loans that they approve. In other words, it is there money that is being loaned to you. They have their own underwriters, which makes for a smoother transaction and they are usually local people that you get to deal with. Some of these types of lenders keep the loan. This means that you will always make your payment to that lender. For instance, Wells Fargo is a Bank that keeps the loans that they originate. Some of these lenders will keep the loan for a few months and then sell them where they would be serviced by a different bank. Guaranteed Rate is a Mortgage Bank that does this. You might make the first few payments to them. Once they sell the mortgage, you would make your payments to the new company. All of the terms of your original loan stay the same including your payment. The only thing that changes is where you make your payment to.A Broker does not self fund and they do not have their own underwriters for the loan. It works as a go between, between you and the bank that you will ultimately make your payment to. At the closing of your home, your mortgage will be sold to a mortgage service where you would make your payments. An example of this would be if you used XYZ Mortgage, which would be a broker, to buy your home. But you would immediately be making your payment to Wells Fargo, because they are the ones that bought the loan and will service it. A Broker will shop various banks and sell the mortgage off to who gives them the best deal and the most profit. To help you choose the right lender, you should confide with your realtor. If you give your realtor an idea as to your financial situation, they should be able to direct you to a lender that will best fit your needs. |
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