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The Lender:
Bank or Mortgage Broker? |
Mortgages are marketed (that
is to say, offered to you) by several types of lenders. You
can get a loan from mortgage brokers, mortgage bankers, banks,
credit unions, and savings & loans. In most cases, the
lender earns origination fees and, in the case of a mortgage
broker, a broker's fee. The servicer is the company where
you, the borrower, make your payment.
What Is a Mortgage Broker?
Mortgage brokers are much like independent insurance agents
or, for that matter, your local supermarket. They have access
to many lenders (roughly equivalent to suppliers, such as
tomato companies) and many different programs (several brands
of frozen, canned, or fresh tomatoes). In some cases, especially
where your credit is not flawless, and nonconforming properties
are involved, a mortgage broker can find funding for you.
(They might also be able to find tomatoes for you, but that's
extra.) They charge a fee, and are sometimes compensated by
the lenders. They provide a great service for many consumers,
and originate more than 50% of loans in the country.
Mortgage brokers normally originate the loan, process it,
and pass it along to a lender, who sells it to an investor.
These investors range from state pension funds to government
and quasi-government companies such as the Federal National
Mortgage Association (FNMA), or "Fannie Mae"; the
Federal Home Loan Mortgage Corporation (FHLMC), or "Freddie
Mac"; and the Government National Mortgage Association
(GNMA), or "Ginnie Mae." A mortgage broker can,
in many cases, speed up your closing time, do all the processing,
and get you a better interest rate.
The mortgage broker is compensated on commission, and he is
going to have higher closing fees. At a given mortgage brokerage
house, for example, closing fees might be $700. But, some
in the brokerage industry charge up to $1,200 -- which some
of their colleagues (and, indeed, the real estate agents with
whom they work), might regard as gouging. A broker is allowed
to charge whatever he wants for loan processing or "doc
prep" -- document processing.
As is the general rule in shopping: ask. Ask what the broker's
fee will be. You can then make an informed decision whether
paying that fee will be worth it over time if you get a better
deal on a loan.
Banks and Mortgage Bankers
The term "mortgage banker" can refer either to a
loan officer who works at a bank or to the bank itself. A
mortgage banker generally sells the underlying loan to an
investor, but continues to service the loan.
Banks generally have a corporate approach, in which the mortgage
bankers are told, "These are the fees -- don't deviate
from them." So, there is more stability in terms of what
the person sitting across the desk from you is going to charge
for his or her services.
Which Should You Use?
Whichever gives you the best deal. That's why you should shop
around first and find out all you can.
Some borrowers don't like the idea that the mortgage broker
will find them the loan and then exit the picture, leaving
the borrower to deal with a lender. On the other hand, the
borrower will be dealing with a lender anyhow, and mortgage
bankers might also end up selling the loan on the open market. |
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