Loan - Bank vs Direct Lender vs Broker

Asked by Vishal Maheshwari, Fremont, CA Mon Nov 19, 2012

I am looking to buy a single family home in fremont. I have been trying to understand the loan process. The question which I have is as a first time home buyer should I get a loan direct through my bank or through a direct lender or a broker? What pros & cons each have from closing cost & interest rate perspecitve.

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John Dutra, , Fremont, CA
Mon Nov 19, 2012

Great question. From nearly 20 years of experience in the finance industry and working in each of the categories mentioned above, this is what I have come up with:

You are really looking at Bank, Broker or Correspondent Lender with the ability to be a Direct Lender as well.

Bank - One stop source for all financial needs, they do volume work but are limited to one loan source and often have trouble with buyer and response timelines (they do not typically respond nights, weekends or holidays;

Broker - Great variety of sources with multiple programs to reach a more diverse clientele, the issue here is timelines as well. More responsive then banks on a loan officer to client level, they can only shop lenders on a specific day and then make a determination as to who to send it to based on that day's priciing. Once the loan is sent out, they lose control of the loan package. Depending on where it is sent and that particular lenders's workload, meeting contingency and close of escrow timelines can ge a challenge.

Correspondent Lender - This is the institution I work for and I will tell you how I ended up here after years of being both a broker and a loan officer with a bank. As a Correspondent Lenders, many of the institutioins we work with have trained and certified our own underwriters as being able to underwrite the loans in-house. This is very important. We now control timelines and have the ability to check on loans, their status, their approval and more as we process the loan without having to send the package out to any one particlular lender. On top of that, once we have Fannie Mae approval on the loan, I can watch and moniter multiple lenders in house, comparing the rates as the days and the economy roll, locking at the most opportune time instantly while shopping rates online. On top of that, we are a direct lender as well which means we can not only fund our own loans, but can also fund the loans for all the lenders we underwrite for - a tremendous time savings as well. By the way, I can also broker loans out if needed as well. Not my first choice, but I have that option if there is a niche program that none of the lenders we underwrite for carry.

Closing costs for most lenders are comparable, so my preference will always be to work with this type of lender to the benefit of my clients.

Hope this helps my friend.
1 vote
Christy Brock, Agent, Alameda, CA
Mon Nov 19, 2012
Think of the difference between going direct to your bank versus using a mortgage broker like this - Going to your bank is like going shopping at Macys. Macys has great stuff that will probably work for you but you can only buy the items that Macys carries. Using a mortgage broker is like hiring a personal shopper that shop for you in many different stores, including Macys. The costs are about the same. In the end, your loan will most likely be sold to a servicer (the company that you make your payments to) anyway. Find someone that will give you great service and send your file through full underwriting before giving you a pre-approval letter in order to minimize surprises when you get in to contract.
1 vote
Brendandiamo…, Home Buyer, Fremont, CA
Thu Mar 9, 2017
Mostly banker false type because commitment is not ok. so many people is not satisfied from banker person.
0 votes
Lili Chen, Agent, Arcadia, CA
Thu Mar 20, 2014
The best way is to consult both , then compare . It will be a big difference on which lender that you use.
0 votes
Dana Lindberg, Both Buyer And Seller, Phoenix, AZ
Sun Oct 6, 2013
Whether you talk to your bank officer, lender, or a broker when you plan to buy a house will depend on your situation.

Banks are highly competitive in nature, so you can expect to close a deal within a short period of time. However, they require more from prospective buyer such as high credit score and down payment.

Lenders on the other, offer more flexible loan programs. So if you are looking at creative financing, you might as well go for a lender.

Dana Lindberg
CFS Mortgage -
0 votes
Claudia Mull…, Mortgage Broker Or Lender, Fremont, CA
Wed Nov 28, 2012

Closing costs for each lender are going to be very comprable.

Where you are going to really benefit depends on your personal file.

If you have a 'cookie cutter' loan that has 20% down payment and credit scores over 750, then you have your pick of where to take your loan. You may choose to discuss with your credit union or general banker. With these types of loans, they are super competative in pricing and, because not a challenging loan file, they can close it with ease.

If your file how some 'challenges' such as lower down payment, challenging credit issues or some other oddity, then you may want to shop loan officer not lender.

As you see on Trulia, most of us with extensive (10, 15 , 20 years) experience or not at a bank. This is due to the limitations that the banks have on what loans they will fund. It is also due to the fact that banks come in and out of the market. They may be offering great pricing for a while and then pull out of the market.

Those of us with experience do find ourselves at a reputable brokerage or banking firm. These entieties have incredible resources for first time home buyer programs, government loans and special niche mortgages.

Interview your lender as you would a physician or a financial planner. A really well versed mortgage professional will not only guide you through closing costs and loan program, but will work as a partner with your real estate agent to get your contract accepted.

Whatever your choice, enjoy the experience!! Happy Househunting! cg
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Nov 19, 2012
All 3 can be similar in what they offer. However service is never teh same, you should start with choosing a local and trusted loan officer who can prequalify you and guide you through the loan process. Often ask your buyer broker for a referral of a good loan officer in your area.
0 votes
Joe Patel, Agent, San Ramon, CA
Mon Nov 19, 2012
As others mention, work with a realtor and he/she can recommend good lender out there.We have in house lender who can help you pre-approve for the loan. Check with couple banks who can show you their rate on different loan scenerio.I hope this helps.Good luck!!!
0 votes
Pacita Dimac…, Agent, Oakland, CA
Mon Nov 19, 2012
Ask your REALTOR for recommendations

Since lenders are critical members of your team serving you to ensure you are able to buy a property, they should be able to work well together.

Most REALTORS will have lenders they trust with their clients.

I've had experience with buyers choosing their own lenders who were either not as responsive as we would have liked, or who were not totally invested in the process.

A mortgage broker has an advantage over bank lenders in the sense that they can look in various places for a loan that will suit your needs -- however, make sure you understand the fees they charge, some of which a bank may waive.

Online banking is one of the most troublesome because you're just a number, you're not dealing person-to-person, you can't call them after hours, you can't push them to rush, etc. My two cents.

The best lenders are those we can call after hours, and who have great working relationships with the realtors who are sure to refer them if they exceed expectations.
0 votes
Bob Jakowini…, Agent, Livonia, MI
Mon Nov 19, 2012
Get a good faith estimate from each of them and compare what they can do for you. I have had several good experiences with both.
0 votes
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Mon Nov 19, 2012
Use the local lender that your Realtor trusts the most, good luck,

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
Web Reference:
0 votes
Steven Ornel…, Agent, Fremont, CA
Mon Nov 19, 2012
Hi Vishal,

Here are a number of links that should help you very much:

"Retail Banks vs. Mortgage Broker/Bankers"
Personally, I only work with Mortgage Broker/Bankers.

“Pre-Qualified vs. Pre-Approved vs. True Pre-Approval”…

Best Regards, Steve
0 votes
I'm Barry Sharf from NY, USA. From my vast experience in finance industry, I suggest you to consult both of them and compare what they offer.
Flag Tue Mar 28, 2017
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