A New Choice for Home
Financing: Correspondent Lenders - Online Loan Brokers For Mortgages and
Home Loans
July 25th 2006
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Refinancing a
home |
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When you begin your search for a new home loan, one of the first things
to consider is where you'll get the money. Your basic choices will be
mortgage brokers and banks.
Your first instinct may be to go with your local bank, who you know from
doing business with them for other things, such as your checking and
saving accounts. But you've probably also heard that mortgage brokers
can get you a better interest rate, since they deal with hundreds of
lending sources. It can be confusing, but there’s a third source of
funding that combines the best of both--the correspondent lender.
In order to understand the differences, let’s look at how the lending
process works in each case. Mortgage bankers are given rate sheets by
their institutions, telling them what interest rates they can quote to
their clients on any given day. There’s only so much a bank can do, with
regard to interest rates, because it needs to remain profitable in order
to stay in business.
Mortgage brokers have an advantage in that regard. They're not loaning
their own money, and are free to "shop your loan around," looking for
the best terms from various lending sources. They make their money by
getting loans at discount prices and then marking them up, making money
on the difference. Since they have many sources to choose from, they can
often find loans at lower rates than most banks.
The third alternative, correspondent lenders, combines the best features
from both groups. Correspondent lenders are similar to mortgage bankers
in that they make the lending decision and fund the loan with their own
money or credit line. However, as soon as a loan has closed, it’s sold
to another lender at a previously negotiated price. It’s the best of
both worlds for you as a borrower. You'll be dealing with the banker who
is funding your loan, yet that banker is able to shop your mortgage
around, which can obtain you a lower interest rate.
Correspondent lenders can sometimes be difficult to find, since they're
generally smaller institutions, operating on a regional basis, and it
can be hard to tell whether a lender is a broker or a banker, based
solely on the company’s name. One way to find out is by visiting the
lender’s website, if they have one. You'll normally find a button you
can click that will bring up a page containing a detailed description of
the company. If the lender doesn't have a website, you may find their
phone number in the Yellow Pages.
Although they may not always be easy to locate, with a little digging,
you may find that a correspondent lender offers an attractive
alternative to a banker or mortgage broker when it comes to shopping for
your next home loan.
Jeanette
J. Fisher
Copyright
© 2005 Jeanette J. Fisher All rights reserved.
Jeanette Fisher is the author of "Credit Help! Get the Credit You Need
to Buy Real Estate," and other books. Real estate financing questions?
Visit her website.
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