Using a Correspondent Lender
for Your Mortgage |
By Iwona Kurecka |
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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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