I am fired up today after reading an article full of misinformation and lies titled, “Direct Lender vs. Mortgage Broker.” I am here to set the record straight.
I am shocked and dismayed by false information posted by freelance writers, who frankly, have no clue what they’re talking about.
I am saddened by the lies they are spreading on the Internet. For example:
NextAdvisor posted a “pro” and “con” list that is alarmingly untrue. Sure enough, the writer has never worked in the mortgage industry. I have no idea how she drummed up the list of falsehoods mixed with a few facts, so I will tell you the truth.
I am a licensed mortgage broker (NMLS # 1284134). I have worked for a direct lender and for a mortgage broker. I have worked in both retail and wholesale lending since 1998. I have both direct and inside experience in the mortgage industry.
Here are the facts:
- Only a mortgage broker has a legal fiduciary responsibility to get you the best loan program with the BEST pricing and lowest interest rate they have available. The direct lender has a responsibility first to the lender, not to you, the borrower.
- A licensed mortgage broker must pass a rigorous test, take classes annually, be fingerprinted and background-checked, and credit checked.
- A mortgage broker shops 30 to 50 wholesale lenders for you.
- A mortgage broker shops wholesale, so the vast majority of the time, he or she will get you a lower interest rate than what you could find yourself with a direct lender. Even though not all lenders work with brokers, those lenders usually have higher interest rates and fees anyway, so who needs them?!
- Lie: “Brokers often charge their fees directly to the homebuyer.” NO. The broker fee is paid by the wholesale lender 99 percent of the time. It is normal for a homebuyer using a mortgage broker to pay no broker fee whatsoever. Only in unusual circumstances would that be different.
Another misconception is stating that Quicken is a direct lender. The truth is that Quicken (now called Rocket) has both a retail (direct lender) channel and a wholesale (broker) channel. If you go directly to Quicken, your interest rate will be approximately .25% to 5% higher than if you go through a mortgage broker.
The problem with the Internet is that anyone can post whatever, true or not.
The good thing about the Internet is that professionals can also post what is true. We can only hope that consumers find the truth and shun the lies.
If you found this information to be important, please share it with friends and associates who want to become home owners. Personally, I am not accepting new applications for home loans at this time, so my intent is for educating the public, not for generating new applications for myself.
Thank you for reading and sharing.