In what I hope to be a series of blogs, I wish to shed a little light on the mystery of mortgages. The most difficult and frightening aspect of buying a home these days is the trip to the lender. They are seen as the destroyer of dreams, the harbingers of bad news, and money thieves. They have never been thought of highly, but the “credit crisis” has only darkened their images.
Like members of any profession there are good ones and there are bad ones. When shopping for a dentist or accountant most people ask their friends for recommendations. This is a good place to start when looking for a lender. But first, let’s clear up a couple of definitions:
Direct lender: This is not a phrase often heard outside of the banking industry. This is the local bank employee who handles the loan you get at that bank. It is a person employed directly by the lender and only represents them. Pros: you know exactly who you’re dealing with and there are no additional fees. Cons: they represent only one lender.
Mortgage broker: this is a licensed real estate agent (in the state of California) who specializes in loans. They will shop for the best loan and if they do enough business, they can get you rates from that same bank that are lower than you would get dealing with them directly. Pros: more choices. Cons: additional fees.
So, which is better? That depends upon what you need. Do you have an ongoing relationship with a bank? Then the direct lender might be best. Is this your first loan? Then maybe you need someone to both shop and fight on your behalf. Someone who knows how to present you in the best light. Someone who only gets paid, if you get a loan.
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