There is a special class of mortgage banks that find, process, approve, and fund loans but can also act like a mortgage broker by shopping around for the best rate or a particular loan program. These operations are known as correspondent lenders.
A correspondent lender will make an agreement ahead of time to sell a loan at a particular rate and at a particular time. Meanwhile, the correspondent lender has agreements with other mortgage banks that offer rates and programs at wholesale prices. Just as a broker can have several wholesale lenders from which to select, a mortgage banker may have several correspondent channels that offer the very same loans that mortgage brokers can find.
I believe this is the best choice — a mortgage bank with mul
tiple correspondent relationships. These mortgage companies combine the control inherent in a mortgage bank with multiple sources for rates and loan programs.
It's difficult to tell by the name of a company if it's a banker, a correspondent, or a broker. You can do some research on the company's website. The site will tell you whether the company is a broker or a direct lender. But correspondent bankers won't have such a description. You'll have to call them up and ask directly if they're mortgage bankers — and so, do they also have the ability to shop around for a better rate?
If you can find a correspondent banker, that would get my vote in the broker versus banker match up.
I didn't mention this at the outset, but I do want to address a couple of items concerning online lenders. First, an online lender is not simply a mortgage company with a website. Every mortgage company has a website.
An online lender is a business that has no building or physical presence in your area but does have a website dedicated to mortgage lending. You apply online and work with customer service people who are employed by the lender.
When you apply online, the lender begins to process your loan and you send the requested documents by fax, mail, or e-mail. When there are questions, you talk with the customer people directly, but you never meet them in person.
Many stock brokerages and investment advisers offer online mortgage operations as a service to their investor clients. If you feel comfortable working completely online with a customer service representative, it's oк, but I wouldn't recommend it to someone who could use a little handholding or doesn't understand the mortgage process.
If there's a problem with the loan application or there's a question that needs to be resolved, an online lender can at times hinder more than help. Sometimes the customer service representative does not fully understand the issue. Sometimes the rep doesn't know about local laws and statutes affecting the buyer.
And your customer service person or online loan officer probably isn't the most knowledgeable in the field. The best loan officers get paid a lot because they know the business inside and out and can guide someone effortlessly through the loan process.