Roshan, Home Buyer in New Haven, CT

I've read it's better to get a mortage direct from the originator rather than through a broker....true/false?

Asked by Roshan, New Haven, CT Wed Mar 7, 2012

According to what I've read and advice from friends, I was told to get my mortgage directly from the originator. While a broker can shop around more, they also take a percentage for their efforts. And also send people to certain lenders who give them kickbacks.

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Scott McCaul…, Other Pro, Portsmouth, NH
Wed Mar 7, 2012
BEST ANSWER
Brokers have a tough gig these days, as they do not underwrite their own loans. Instead they send it off to the bank who will buy the loan eventually. This process can be time consuming.

Big banks are bears these days. I know, I used to work at one. Closings take forever- if they can do the job at all. Without getting too technical on you, the shift in lending these days is the big banks not being able to get the job done efficiently, so others who can have stepped in. As a result, some of those big banks have laid off most of their loan officers, and concentrated on servicing loans (collecting monthly payments from borrowers after it closes). In the broker world, they still have to deal with the big bank turn times, which can be lengthy- because again they must have those banks finalise the loans.

Correspondent lenders have stepped in as that "sweet spot" for borrowers these days. These are companies who lend their own money and decision their own loans, but who will sell the loan after you close. So, you get faster closing and great rates. When the loan closes you will end up having a big bank service your loan for the rest of your loan- which, is what big banks do best these days, so that's a positive thing. Correspondent lenders use multiple sources for their loans, so they have access to many different loan types and programs and often most of the best rates just as a broker would, but without the delays.

As far as kickbacks go... it's something I have no experience in ever even seeing. People may have their preferred channels of who they choose to lend with. The lending world has become very transparent now, so any sort of fees are always displayed. Kickbacks would put a lot into jeopardy for all parties, so I can't imagine it is practiced.

Hopefully that explains a little about the market, without getting too deep.

Regards,
Scott
Web Reference:  http://www.LendWithScott.com
1 vote
Annette Levi…, , New York, NY
Fri Mar 9, 2012
Roshan,
No one gets a kickback. You are referring to YSP (yield spread) that the lender gives the broker for the mortgage based on the rate. There are contracts in place saying the maximum a lender gives to the broker, anything over that goes as a credit to the buyer for closing. If you go directly to the lender, they have to pay their staff to do the work.
You definitely need a broker since based on your questions, you are not vanilla. Anyone who has over a 720 FICO, been on their job over 2 years (W2 without business expense deductions) and have a proven record of saving money can go directly to the lender. Everyone else needs help and needs a mortgage broker or banker.
1 vote
Carl Henker, , 95928
Thu Mar 8, 2012
It is not a Kick Back it is compinsation to the broker for their efforts in assisting with your obtaining a loan. Go with whom ever has the experience and provides you the best service. Going direct could mean the lender makes a bigger profit as they are not paying the broker for his work. There is no true or false answer.
1 vote
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