Refinance Tips • Biweekly Payments • Broker vs Direct Lender • When to Refinance • Home

Mortgage Broker or Direct Lender?

The truth is neither or both. Confusing? This is what it is. You can get a good or better loan program from a direct lender just as easy as you can from a mortgage broker. If you do a little research on the internet you will find the mortgage brokers claiming to be the right choice because they deal with hundreds of lenders not just one and the direct lenders claiming to make their own rules have the lowest costs etc. Their "truth" is according to how their best interest is served. Here is snippet from a report from the FTC (Federal Trade Commission):

"The Effect of Mortgage Broker
Compensation Disclosures on
Consumers and Competition:
Executive Summary
Federal Trade Commission
Bureau of Economics Staff Report

James M. Lacko
Janis K. Pappalardo
February 2004
Page 2
EXECUTIVE SUMMARY

This study of over 500 recent mortgage customers in an experimental setting finds that the mortgage broker compensation disclosure proposed by the Department of Housing and Urban Development (HUD) is likely to confuse consumers, cause a significant proportion to choose loans that are more expensive than the available alternatives, and create a substantial consumer bias against broker loans, even when the broker loans cost the same or less than direct lender loans."

SO, MORTGAGE BROKER OR DIRECT LENDER?

The report seems to suggest broker loans cost the same or less than direct lender loans right? The truth is the truth. Both about the same. The difference is a mortgage broker will be able to choose the best mortgage loan from many lenders as opposed to being subjected to the guidelines of one direct lender. If you have read some of the other pages on this website you will know how you stand to qualify for a home loan. If you can qualify for "full documentation" you can just walk in to your local bank or credit union and apply. You may not get the lowest rate but you will get a good interest rate. A mortgage broker can give you a lower interest rate from Washington Mutual or BofA than they will give you at the branch level. The reason for this is a mortgage broker receives very competitive wholesale rates from these intitutional lenders which in turn can be passed on to you. If you will not qualify for a "full documentation" loan, it is suggested you speak with a professional mortgage broker.

Loan Directory | Site Map | Add Url