Bank, Broker, Lender… What Is The Difference?

Have you decided to become a homeowner but aren’t sure who to use for your lender? In this video, I’m going to talk about the difference between a banker, broker, and correspondent lender. I’ll break down the details of these lender rates and requirements so you can choose the best option for you.

Choosing The Right Lender

Because there are thousands of lenders out there, it can be difficult to choose the right one. By understanding the differences between a banker, broker, and correspondent lender, you’ll be able to pick the best option for your specific situation.

When you’re looking online, there’s a significant difference between an online lender and an in-person lender. I’m not being judgy here; there’s no right or wrong answer. However, it’s important to note that online lenders will typically not live in the area where you’re looking to live. While this is not necessarily bad, there are key differences in local markets. This includes how property taxes work, the local agent environment, and the trust that a seller’s agent is going to put in the lender when they’re looking at what offer to accept.

Who you align yourself with when you’re buying a home is very important. So talk to your agent. Look online when comparing between an online bank, broker, or correspondent lender versus somebody in your local market. My team and I are proud to call the Pacific Northwest home, and we’ve been here originating loans since 2009.

Understanding Bankers

Let’s now discuss the differences between a banker, broker, and correspondent lender. First, a banker is exactly what it sounds like. You can walk down the street to your local bank where you have your checking, savings, and car loan and you’re going to get a mortgage. 

Banks are averse to risk. Think of them as the white-collar crew. They want to have your loan in a very tight box, meaning excellent credit, excellent income, and excellent assets. They’re also going to limit who they work with. That being said, bankers aren’t necessarily bad. You can typically find extremely competitive interest rates when you go to a bank.

The challenge is that the banker is not necessarily motivated with you in mind. These are salaried employees who do all kinds of things, and they don’t necessarily specialize in residential mortgages. Pro tip: they don’t have to go through the same licensing and education requirements that we do. Right or wrong, the education requirements, experience, and motivation are different. Keep that in mind if you’re going with a bank.

Mortgage Brokers

If you’re looking at a broker, a mortgage broker has access to any investor or bank that is available on that market. Here’s the challenge with going with a broker: they don’t control the process. 

Brokers don’t control interest rates, underwriting, or guidelines. Additionally, when a program is available, a bank or investor could decide to take it away. In down markets, we have seen horror stories of people being halfway through the process just to have the broker call and tell them that the investor or bank they were working with no longer offers that program. That means you can no longer qualify for your home. 

Brokers also have extremely competitive rates. However, they lack a lot of control that you’ll get with a bank or a correspondent lender. That’s something you’ll want to keep in mind.

Correspondent Lenders

I’ve worked in the broker world and the correspondent world throughout my career. What I love about being a correspondent lender is the control. Think of a bank that only does loans, and imagine having the ability to select investors like a broker while controlling the process. Of course, we’re not for everybody, but there are some key differences in working with a correspondent lender. 

Correspondent lenders can be local but also in other states, giving them a broad footprint. They can bring on several types of loan programs and have a larger appetite for creativity, flexibility, and different loan options—especially because they can use different banks and investors for different programs.

Using a correspondent lender is like going from a Chevy dealership that only sells Chevy to going to a CarMax that sells Chevy, Ford, Dodge, and many others. They sell great cars and give you the ability to pick which vehicle fits you best. That’s the same with a correspondent lender. You will see, however, that correspondent lenders are at the higher end of the cost spectrum. Great service in their world typically comes at a cost.

Working With Dwell

This is the beauty of Dwell. We have bridged the gap. My team and I are salaried, capping the amount of compensation we can get which equates to better rates for you. The larger the loan, the lower the interest rate. This is a unique feature we have here at Dwell. 

So make sure you talk to your loan officer at Dwell to get more information about our competitive rates and fees. There’s so much that goes into who you work with, so make sure you do your research and prepare in advance of making your offer. If you have any questions, feel free to reach out to me and I’ll be happy to help!

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