Question by bayleigh789: Can someone explain the difference between using a mortgage broker, mortgage lender, & a bank for refinancing?
What are the benefits and drawbacks to each? We are refinancing our home.
Answer by bostonianinmo
A mortgage broker matches up borrowers and lenders. They frequently work with borrowers with difficult getting standard financing. Mortgage brokers have to turn a profit somewhere and that usually results in higher fees or interest rates.
A mortgage lender is anyone who lends money for real estate financing. It could be a bank, credit union, finance company, a firm that specializes in mortgages only or even a private investor. The term is too generic to list any benefits or drawbacks.
A bank is just another source of potential funding. Most banks prefer to limit their portfolios to lower risk borrowers though some smaller ones will specialize in their own geographic area and may be more willing to lend to local borrowers with less than sterling credit. Banks are more tightly regulated than some other sources of funds so their criteria has to be somewhat tighter than others.
If your credit is good, you generally should steer clear of brokers. Credit unions and local banks are my preferred source but the big national banks and lending chains like Ditech.com sometimes can offer the best deals. My current refi was with Ditech (a division of GMAC) and was the clear winner at the time that I refinanced but their current best isn’t quite as good as what my credit union is offering.
The short answer is to shop around for the best deal. Don’t worry about multiple applications messing up your credit score, either. Multiple queries for the same product in a 30 to 45 day span of time are scored as a single query and will NOT hurt your score.
Know better? Leave your own answer in the comments!