The mortgage broker is a vital part of the home buying process. They negotiate with lenders to find financing for their clients and provide guidance throughout the entire process. Mortgage brokers can specialize in certain types of mortgages, or they might work with all types. However, there are a few common types that you should be aware of.
- Retail Broker
A retail broker is a broker who works with individual homeowners. For example, they might use the services of wholesale brokers to find lenders, or they might work directly with banks and credit unions to secure financing for their clients. The Best Mortgage Brokers NZ will have a large network of lenders they work with and will only offer the best rates to their customers.
Retail brokers often have relationships with multiple lenders that allow them access to more competitive rates than an individual borrower could find on their own. However, they usually charge a fee for the service of matching you with lenders, and they might require an application fee from borrowers as well. Nevertheless, these mortgages are popular because they have low-interest rates, fixed terms, and reasonable fees.
- Wholesale Broker
A wholesale broker is different from a retail broker in that they work more with brokers than individual homeowners. In addition, they are paid by the lenders to find borrowers, so their commissions are typically linked to rates or fees for loans rather than being dependent on loan volume.
Wholesale brokers often have relationships with many lenders, which allows them access to competitively-priced mortgages of all types. Wholesalers may specialize in certain types of mortgages as well–for example, some might only deal with jumbo loans while others focus exclusively on VA Loans.
- Mortgage Banker
A mortgage banker is a bank or credit union that provides financing directly to borrowers. In many cases, the same lender will offer both retail and wholesale services and mortgages of their own. In addition, mortgage bankers often allow brokers access to wholesale rates if they refer business over to them, which means you can get a better deal by going through an independent broker than from the local branch of your favorite bank.
- Correspondent Lender
A Correspondent lender is a bank or credit union that provides financing to wholesale brokers, finding borrowers. The borrower will be dealing with the broker and not directly with the lender.
Correspondents charge interest rates based on what they pay for loans from lenders or funders, so loan costs are typically higher than if you went through a retail broker. But correspondents often have access to niche products like jumbo loans and other hard-to-find mortgages that might otherwise only be available to high net worth individuals.
- FHA Lender
An FHA lender is a bank or credit union that provides financing to borrowers through the Federal Housing Administration. They offer loans to low-to-moderate-income buyers, first-time homebuyers, and those who have less than perfect credit.
FHA lenders are popular with both brokers and direct writers because they allow lower down payments–only three percent of the purchase price must be paid at closing in most cases. This makes them an especially good choice for self-employed people seeking to buy their dream homes but might not otherwise qualify under stricter lending standards imposed by private banks.
- USDA Lender
A USDA lender is a bank or credit union that provides financing to borrowers through the United States Department of Agriculture. They are similar to FHA lenders in most ways but have slightly stricter lending guidelines.
USDA loans are designed for rural applicants who cannot get financing elsewhere, so they can be hard to find if you live in an urban area.
The Final Words
Wholesale brokers provide additional options beyond what retail banks offer; correspondents can find rare mortgages, and mortgage bankers allow borrowers to work with local trusted advisors.