Ever wonder why you can get a better deal going through a mortgage broker than you can if you go directly to a lender? After all, the mortgage broker just turns around and sells it to a major national lender anyway? So logic dictates that cutting out the “middle man” should yield you a better deal, right? Not in the case of mortgages.
Believe it or not, 65% of all mortgages in America are originated by mortgage brokers. Because many of those brokerages are small businesses, they can keep their overhead low and effectively lower their margins. This means lower rates and closing costs for consumers. Although lenders quietly solicit mortgage business, it costs them much more to originate a loan as they have to maintain a larger staff to do so. Therefore, they rely on thousands of mortgage brokers who in turn have “mortgage sales people” to find the business. The lender pays the broker a commission for finding, processing, and delivering the loan to them.
But not all mortgage brokers were created equal. You still want to shop for the best deal as some charge unnecessary origination fees for their services. But don’t be fooled, the lender is paying them for their services so you shouldn’t have to.
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Gregg Harris has written 16 articles on LenderCity
