Shopping for Lenders
Home loans are available from a variety of lenders - thrift institutions (savings banks and savings and loan associations), commercial banks, mortgage companies and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you're getting the best price.
You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly - they function as a middleman. Simply put, they find a lender for you.
A broker's access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Once again, it's a good idea to shop around. Consider contacting more than one broker, just as you should with banks or thrift institutions.
Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions operate as BOTH lenders and brokers. To make it more confusing, most brokers' advertisements do not use the word "broker." Therefore, be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the lender's origination or other fees.
A broker's compensation may be in the form of points (one point equals 1 percent of the loan amount) paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.
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