Mortgage lending companies and mortgage brokers are among two of the most popular options for home buyers and would-be refinancers when it comes to home financing choices. So what’s the difference between the two? Turns out, there’s a lot. While both mortgage lending companies and brokers can yield you a good loan to either purchase or refinance a home, there are many things to consider before you choose one over the other.
Mortgage Lending Companies
Whether you’re referring to a bank that sells many financial products or a company that sells only mortgages, mortgage lending companies are financial institutions that lend money to help people buy or refinance their homes. This means that in most cases, as long as they are direct lenders, they finance all of their own financial transactions. When you approach a mortgage lending company for a loan on a home, they put up the amount of money required to complete the loan.
Once the loan is closed and complete, some mortgage lending companies will then sell off the servicing of the loan to another company. This means that while you may have been dealing with XYZ company during the processing of your home loan, you may be doing business with ABC company the minute your loan closes.
However, not all mortgage lending companies do this. Some direct lenders, such as NLC Loans, service the majority of the loans that they close. This means that you’ll continue doing business with the company you became comfortable with during the loan process. Before choosing a mortgage company, it is important to inquire as to whether or not they will likely continue to service your loan after it closes.
A mortgage broker isn’t actually a mortgage company at all. Instead, they function as an intermediary between home buyers or refinancers and mortgage lending companies or banks. They work with multiple lenders at once to try to find the best deal for the borrower. This can be very helpful to those looking to take out mortgages and can sometimes result in savings in interest rates or fees. However, it is very important to remember that mortgage brokers take their own fees and commissions, so that needs to be factored into the total cost of the loan in the first place.
Once your broker finds you the best value for your deal, it’s also important to check with the mortgage company or bank to ask about who will service the loan once the loan closes. There are some cases where brokers can get slightly lower rates on mortgages, but again, if a slightly lower rate is outweighed by the cost of the broker to begin with, it may not benefit you to use a broker’s service.
Choosing Between the Two
Your personal preference will guide you when it comes to choosing between mortgage lending companies and mortgage brokers. No matter which you choose, you should feel comfortable and confident in your choice. Consider the pros and cons of each and make the decision that best suits your individual needs.