What is the difference between a direct lender and a mortgage broker?
Direct Lenders work directly with borrowers and fund loans in their own names. Mortgage brokers take applications, collect supporting documentation and then submit the information to a lender to fund the loan. Mortgage brokers traditionally charge a 1% commission for their services. This may be collected from the borrower in the form of an origination fee or from the lender who passes the cost on to the borrower in the form of a higher interest rate.
Direct lenders work directly with borrowers and fund loans in their own names. Mortgage brokers take applications, collect supporting documentation and then submit the information to a lender to fund the loan. Mortgage brokers traditionally charge 1-2% commission for their services. This may be collected from the borrower in the form of an origination fee or from the lender who passes the cost on to the borrower in the form of a higher interest rate. The Internet now allows borrowers to shop lenders on their own and obtain the lowest rate available without having to utilize the services of a mortgage broker.
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Related Questions
- How does a mortgage loan originator working for a licensed mortgage lender or mortgage broker meet the requirement to be covered by a surety bond?
- Does a mortgage broker or lender need to be a FHA approved lender to originate a single family loan that is subsequently insured by FHA?
- What is the job of the mortgage broker?
