Direct Lenders or Mortgage Brokers

A direct lender is any financial institution that can offer a mortgage, including commercial banks with a slew of services and savings and loan associations, aka thrifts. 

If you choose to find a mortgage going through direct lenders instead of mortgage brokers, you have to apply individually to each lender. 

This might seem like a time-consuming hassle, especially since it often seems, nowadays, that there is little variation between rates and terms. 

But even a difference of 1% can make a huge difference in the life of your loan. 

One of the benefits of direct lenders is that it’s easier to solve any issues that might come up. 

Your broker may not be able to answer all the questions that the lender might have, so you might get better results talking to a lender directly. 

Going through a direct lender may also be faster than using a broker, sometimes and depending on your commercial loan request. 

If you have several accounts with the same bank, they may offer better terms for one of their loyal and valuable customers.

Mortgage Brokers

The primary benefit of a mortgage broker is comparison-shopping: 

The broker can get a variety of quotes from different lenders and present them to you all at once. 

Instead of applying to each lender separately, you only have to speak with one mortgage broker to see what sort of loans you might qualify for. 

Brokers also work with you on your application, streamlining the process.

Mortgage brokers used to have a dicey reputation. 

They were loosely regulated and, because their compensation was based on the nature and size of the loan, some were known for enticing borrowers to choose high-risk mortgages, or to borrow more than they really needed to.

 Now that there are more protections in place, however, they’re a good alternative, especially if you'd like an advisor/middleman to deal with lenders for you. 

Some lenders work exclusively with mortgage brokers, providing borrowers access to loans to which they otherwise would not have access.

Remember, however, the broker is paid a final fee based on the mortgage amount, which can influence his advice and research. (You pay that fee, unless the lender is willing to cover it.) 

And, like some commission-based financial planners, some brokers work mainly with – or are partial to – certain lenders, which could inform the choices they offer you. 

The Bottom Line

You don’t have to choose between mortgage brokers and direct lenders. 

You can get quotes from both to see what is out there for you. If you call both mortgage brokers and direct lenders to compare their rates, you’ll be able to judge more fairly which route you want to go. 

If you don’t want the hassle of contacting various banks, a broker might be the better option. 

If you already have a bank that you have a good relationship with, that might be the better option. 

Commercial loans do require upfront fees when your loan request is not conforming to standard LTV’s, so be prepared to pay for Valuations, online and inspections that can cost up to 1% to 3% depending on location and type of commercial loan requested.

VII capital Funds has an assortment of programs and lending products that will help a small business owner in this regard. 

Kumok, Zina. “Mortgage Broker versus Direct Lenders: Which Is Best?” Investopedia, 5 Apr. 2018, www.investopedia.com/articles/personal-finance/090915/mortgage-broker-vs-direct-lenders-which-best.asp.

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