When you need a mortgage, you have a few options. You can go directly to your bank, use a mortgage broker, or a direct mortgage lender. While each option provides the same end result – a mortgage to buy a house, the process to get there differs with each option.
In this guide, we’ll focus on the benefits of using a direct mortgage lender.
What is a Direct Mortgage Lender?
First, let’s define a direct mortgage lender. Any entity that works directly with you to give you a home loan from their own programs is a direct lender. A direct lender may be a bank or a mortgage company. A direct lender underwrites and funds the loan in their name. Down the road, they may sell it to Fannie Mae, Freddie Mac, or any other secondary market buyer, but the process starts with them. There isn’t a middle man or broker. You deal directly with the company providing the funds.
The Benefits of Using a Direct Mortgage Lender
Below we uncover the benefits of going directly to the mortgage lender:
When you eliminate the middle man, there’s no reason to increase the pricing. Brokers need to make money, which means they increase your costs slightly on top of what the mortgage lender offers. While there are benefits to using mortgage brokers in certain situations, you’ll definitely pay for it. Going directly through the mortgage lender, you take advantage of the lower pricing by eliminating the middle man.
When you go directly through the lender, you go right to the source, so to speak. In other words, you don’t have to wait for the lender to talk to the broker and the broker to talk to you. Talk about delays in the process. Going directly to the lender means you hear right from the horse’s mouth what you need to get the loan to closing.
Ability to waive certain requirements
When you work with a broker, they have to work within the guidelines provided to them. If there’s a unique situation, they may or may not be able to get the issue resolved. Going directly to the lender, though, you may have more flexibility. Lenders can make judgment calls on a case-by-case basis.
Mortgage lenders offer personalized service based on your needs. They know the full parameter of the programs they offer and how they can help you. Mortgage brokers tend to focus on the programs that offer them the highest commission, avoiding the ‘other’ programs that may be suitable for borrowers.
The Downsides of a Direct Lender
Of course, there is always a downside to any situation. When you use a direct lender, watch out for the following disadvantages.
You must apply to each lender separately
The pressure is on you to apply for more than one loan program. If you want to compare rates or program options, you’ll need to apply with each lender on your own. If you work with a broker, they do the legwork for you. With one application, you can apply for multiple loans and compare your options. If you have the time, though, you may save money and headaches going through a direct broker.
Lenders have limited options
Lenders can only provide access to the programs they have. If you don’t fall within the guidelines of any of their programs, you will have to look elsewhere. This means starting another application, credit pull, and underwriting process with another lender.
Ideally, working with a bank you already have a relationship with will provide the best results. The bank already knows you and your financial habits. They may even reward you for your loyalty. But, shopping around with different lenders can help you get the best program, fees, and rates for your loan. Do your legwork and find the loan that offers the best options to give you the best bang for your buck.