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A New Choice for Home Financing: Correspondent Lenders
Author: Jeanette Joy Fisher
When you begin your search for a new home loan, one of the first things to consider is where you'll get the money. Your basic choices will be mortgage brokers and banks.
Your first instinct may be to go with your local banker, because you know them from doing business with them for other things, such as your checking and saving accounts. But you've probably also heard that mortgage brokers can get you a better interest rate, since they deal with hundreds of lending sources. It can be confusing, but there’s a third source of funding that combines the best of both--the correspondent lender.
In order to understand the differences, 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. 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.
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. They make their money by getting loans at discount prices and then marking them up, making money on the difference. Since they have many sources to choose from, they can often find loans at lower rates than most banks.
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. However, as soon as a loan has closed, it’s sold to another lender at a previously negotiated price. 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.
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. One way to find out is by visiting the lender’s website, if they have one. You'll normally find a button you can click that will bring up a page containing a detailed description of the company. If the lender doesn't have a website, you may find their phone number in the Yellow Pages.
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.
© Copyright 2004 Jeanette J. Fisher All rights reserved.
About the author:
Jeanette Fisher is the author of "Doghouse to Dollhouse for Dollars: Using Design Psychology to Increase Real Estate Profits," "Credit Help! Get the Credit You Need to Buy Real Estate," and other books. Real estate financing questions? Visit the new Real Estate Credit Help Center for articles, Credit Tips ezine, and blog: http://www.recredithelp.com
Article Keywords:
Mortgages
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As you may know, I have a very deep passion for real estate
and mortgages. In fact, this website is a true labor of love
for me.
As publisher, one my many duties is to review the
many books, programs and courses about real estate and mortgages
that are on the market today. I’ll be honest with you. Most
of them are garbage. (Although I do strongly recommend
the programs in the “Must Have” box above).
But, let me tell you,
when I came upon the following headline, I new I found a winner…
“Learn How To Quickly Build At Least $40,000
Worth Of Home Equity And Pay Your Mortgage Off In 10 Years Or Less”
-Without Making Biweekly Mortgage Payments-Or Changing Your Current
Mortgage.
Now, the reason I knew it was a winner was because
of the name behind the headline. Craig Romero. Many
consider Craig to be one of the true geniuses in our field. I
have a lot of respect for him, and I
urge you to drop what you are doing right now and click the link
below...
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