Your choices with the MBS and correspondent lenders is easy. Your basic choices will be mortgage brokers and banks. When you begin your search for a new home loan, one of the first things to consider is where you'll get the money.
It can be confusing, but there’s a third source of funding that combines the best of both--the correspondent lender. 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 learn how to become a correspondent lender, since they deal with hundreds of lending sources.
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. In order to understand the differences of correspondent lenders, 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. 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. Since they have many sources to choose from, they can often find loans at lower rates than most banks. Correspondent lenders make their money by getting loans at discount prices and then marking them up, making money on the difference.
However, as soon as a loan has closed, it’s sold to another lender at a previously negotiated price. 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. 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. 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. You'll normally find a button you can click that will bring up a page containing a detailed description of the company. One way to find out is by visiting the lender’s website for correspondent lenders, if they have one. 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.If the lender doesn't have a website, you may find their phone number in the Yellow Pages or contact The MBS Group directly.
