A New Choice for Home Financing: Correspondent Lenders
By Jeanette Joy Fisher
you begin your search for a new home, 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.
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