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Brokers vs Direct Lenders
There are advantages and disadvantages between working with brokers and direct lenders. With brokers, you are able to meet them in person and build a relationship. Brokers will give you the in-person attention that some will want.
Brokers get paid on a percentage of all closing costs and points charged to the borrower. Because of the way their pay structure is designed you must be careful of the points that the broker is charging you. In most situations, brokers will sell you on a low rate but charge high points. Also a broker is the "middle man" in a loan transaction.
Most direct lenders do not get paid based on points or costs. Loan officers from direct lenders will get paid based on units and volume. This way the loan officer and borrower do not have a conflict in interest. Direct lenders are very sensitive to predatory lending. Predatory lending defines as not providing the borrower with the best loan program available to them. Recently the mortgage industry has been highly regulated by the federal government to avoid putting borrowers in situations where they will default in their mortgage payments. In some cases mortgage companies have had their business licenses suspended or even revoked.
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