The Differences Between a Loan Broker and a Loan Lender
For a homebuyer, there are various factors to consider especially if he/she has found the house of his/her dreams.
This is the reason why it is crucial that you consult with a broker when applying for a home loan. However, before taking any action, be sure that you fully understand the differences between a loan broker and a loan lender.
There are two basic differences between the two: a loan broker is an independent specialist who is not committed to any particular entity, such as a lending institution or other type of loan company. A loan lender is generally employed by a financial corporation or a financial institution to promote their products and services.
The service description of a loan lender is that he/she basically provides a representative service on behalf of a bank or other lender. Loan lenders consider the interest of the homebuyer and that of his/her employer as well.
While a loan lender is not required to have a license that is related to the mortgage industry, they are, however, strictly controlled by the code of ethics adopted by the bank or institution they represent.
A loan broker must possess the appropriate licensed. A loan broker functions as an independent service representative who acts as a negotiator between the homebuyer and the lender. In this respect, they are particularly recommended for homebuyers who, for some reason, have poor credit rating, or those who desire to obtain the best available loan terms. Loan brokers don’t receive any fee or payment unless they close a mortgage transaction. Therefore, their livelihood depends on negotiating a mutually acceptable loan.
Loan Broker or Lender
The problem begins when you’re confused as to whether you should seek the help of a loan broker or a loan lender.
An obvious advantage to working with a loan lender is that there is not a “middle man”. Because of this, the lending approval procedure doesn’t take that long, as the required documents are submitted directly to the financial institution.
On the other hand, a loan broker can offer you with a greater variety of financial options, simply because they are not restricted to one particular provider. Loan brokers can be regarded as independent consultants who meticulously find a lender who could meet the requirements of their clients.
They are capable of finding new clients and offering them help with regard to securing home loan. Brokers do this by searching the marketplace for credible lenders and processing the application as soon as soon as they have found the right one. This processing includes the collection of necessary data including credit status, appraisals, and verification related to employment. On the completion of the needed data, the details are forwarded to the lender who will be funding the loan.
What’s good about loan brokers is that they have established strong rapport with different financial and lending institutions, which means they can easily approach a variety of sources for competitive interest rates and terms. Their fees are generally derived from marking up the rates they obtain from lenders, adding fees to the loan, or a combination of both.
Comparisons and Functions
The functions of a loan lender and a loan broker are quite different. Although they are somehow similar because they find new clients, advise potential borrowers on the best options available with regard to their home application, and their income is commission-based.
Loan lenders can also function as if their stated functions include the processing of broker loans. Loan lenders can also act as mortgage consultants, mortgage loan originators, or home loan consultants and mortgage planners. Loan lenders are the sources for your loans and are known under various titles, usually founded on how they acquire their clients and how your loan is processed.
A loan lender may also be classified as an “account executive” or “loan representative”, as he/she could represent the borrower when dealing with a lending institution. Loan lenders’ functions extend from selecting a loan product to closing the procedure.
Whether you’re seeking the help of a loan lender or a loan broker, your primary area of concern should be directed towards finding the lowest rate and fees, and the peace of mind in working with someone you trust.
Finding the lowest rates for your loan depends on a variety of factors. Your broker will keep you updated regarding the continuous changing of the rates percentage. The employment of a broker can help you find the lowest rate and fees because they review the rates offered by multiple lenders. However, the lowest rate obtainable may be from a source not connected to the broker. The loan brokers are tasked with coordinating all aspects of the loan on your behalf. The funding for your loan may be obtained from a bank, credit union, mortgage corporation, finance company, trust company, or even a private investor.
It could be regarded as essential that when seeking and arranging a mortgage loan, it is an advantage to be aware of the differences between a loan broker and a loan lender. Although many homebuyers find the two terms confusing primarily because they think that these two offer the same services, it is also worth understanding that they have differences in functions. Knowing these things can help you in managing your expectations when seeking the help of either a loan lender or loan broker for your home loan application.b