Everyone knows that a home is probably the most significant, and certainly the most expensive, single investment most people will make in their lifetimes. Choosing a mortgage to finance that investment, therefore, is vital to the long term success of that investment. The right mortgage can enhance the value of the home and help you build a significant equity stake. The wrong mortgage, on the other hand, can leave you strapped for cash and even put the home at risk.
When most people think about getting a home mortgage loan, they instinctively think of banks and mortgage brokers. One of the first places many mortgage shoppers head for is their local bank. After all, the staff at your local bank may already know a great deal about you and your finances. Your local bank can be a good choice when seeking a mortgage.
Another popular choice for many people is the mortgage broker. Many borrowers like to use a mortgage broker to find a mortgage loan, since mortgage brokers can have access to a wide universe of mortgage loans not available to local banks.
There is a third option, however, that many people are unaware of. That third way is the correspondent lender. Correspondent lenders are able to combine the best of both worlds, offering the best of mortgage brokers with the best of local banks.
In order to understand the differences between these three types of mortgage sources, it is a good idea to examine how the mortgage process works. In most cases, the mortgage banker is presented with a rate sheet by their bosses. This rate sheet gives the mortgage banker guidance as to what interest rates they can quote to their clients on a particular day, and those interest rates change on a daily basis. Since the mortgage banker must stay within the confines of the rate sheet, the mortgage loans they are able to offer can be somewhat limited.
Mortgage brokers, on the other hand, are not actually loaning out their own money. Instead they arrange the mortgage loans, and they are underwritten by the various lending institutions they represent. This means that mortgage brokers are free to shop around for the best mortgage, and that can provide their clients with a level of freedom banks are often not able to match.
The third option is the correspondent lender, and in many ways correspondent lenders combine the best of the local bank with the best of the mortgage broker. Correspondent lenders are similar in many ways to mortgage bankers, in that the correspondent lender makes the final decision whether or not to lend the money, and they fund those mortgages with their own money.
What makes the correspondent lender different from a local banker, however is that as soon as the mortgage is written it is sold to a different lender at a previously established price. What this means to the potential home buyer is that they get the best of both worlds. They are able to capture the stability and knowledge of the local bank, plus the wide universe of loans available at the mortgage broker. If you are in the market for a mortgage, the correspondent lender is definitely worth a second look.
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