A New Choice for Home Financing: Correspondent Lenders

A New Choice for Home Financing: Correspondent Lenders
If you are looking for a home loan, you need to decide where you are going to get it. Two main possibilities are mortgage brokers or banks.

The first decision that may come to you is to deal with your local bank, which you do your business with (such as saving and checking accounts). It is also known that mortgage brokers offer lower interest rates since they deal with many lenders and can get you a suitable contract. It can be rather hard to make your choice, but there is the third possibility that has advantages of both banks and mortgage brokers – the correspondent lender.

Let’s see the difference between these two lenders. Banks give to their brokers so called rate sheets, which show them what interest rates they can quote to their clients on any given day. A bank needs to remain profitable in order to stay in business, that’s why there’s only a certain amount a bank can do, with regard to interest rates.

Mortgage brokers have an advantage because they don’t loan their own money. They are “shopping your loan around” looking for the best contract from different lenders. They make their money on the difference between a good deal that they get and marked up one that they offer you. But since they have many sources to choose from, even the loan that they offer you often has lower rates than the one from the bank.

But if you want a best of these two ways of borrowing money, you should contact a correspondent lender. Just as the mortgage bankers, correspondent lenders make their own lending decision and use their own money or credit lines to fund the loan. But as soon as the loan has closed, it is sold to another lender at a previously set price. So, on the one hand this will allow you to deal directly with the person that finances your loan and on the other this will allow the banker to “shop your loan around” to get you a good contract.

Sometimes it is hard to tell a correspondent lender right away. The matter is the most of correspondent lenders are small institutions working on a regional basis. Nevertheless, this information can be easily found on the Internet (on the lender’s website) or via the phone (phone number can be found in Yellow Pages). Although you need to do some work to find a correspondent lender, the rates it will offer you can be significantly lower than the ones from your local bank or even a mortgage broker.

© 2010, Jericho Mortgage — A New Choice for Home Financing: Correspondent Lenders