Welcome to the Mortgage Minute with Maureen Martin!
I am sometimes asked what the difference is between an FHA direct and non-direct lender. A direct lender is a lender that is able to loan their own funds to close the loan (that doesn’t mean that they will service them, but they will loan their own money). Whereas a broker puts their name on the application, but does not loan their own money. A mortgage broker is going to broker the transaction out to multiple lenders – which can be helpful with pricing and program guidelines.
Pros and Cons of Direct Lenders and Mortgage Brokers
Pros of a Direct Lender
More control over the file – in-house processing, underwriting, funding, etc. vs. with a brokered transaction requires you to go outward to a lender and have them handle the processing, underwriting, funding, etc.
Typically when a loan is put through a direct lender, it has the ability, in theory, to close faster than if it is brokered.
Cons of a Direct Lender
If you use a broker, you have the ability to shop the loan around. If the direct lender’s investors have overlays on their programs or products, if a loan is brokered, the loan officer can make sure that they broker it to a lender without those specific overlays.
There are certainly pros and cons to both direct lenders and mortgage brokers; and both can be beneficial. I prefer the option to do both!
If you need help obtaining a mortgage loan please contact me at firstname.lastname@example.org I look forward to chatting with you soon!