Hard Money Mortgage Wholesalers and Brokers Compared

A hard money mortgage is a form of financing against the land you will build your home on. Since a mortgage lender will not lend money until the value of the asset can be determined, a traditional mortgage lender will not typically issue a loan for land without a house on it. A hard money loan can be used as temporary financing until the home is built. Once you decide you need a hard money mortgage, you will have several options of where to go from there.

Hard Money Mortgage Wholesalers

Mortgage wholesalers rarely interact with the general public. They offer loans through different avenues of representation. Some have retail banks as part of their company structure. Others have representatives, such as correspondents, who go through the process of contacting customers for the loan process. Correspondents and banks will take care of sourcing the loan. They will accept your application, underwrite the loan and finalize your financing. Then, the loan will be carried by the wholesale lender. Wholesale lenders often sell loans to other lending institutions. Thus, you should be prepared for the fact that your loan could change hands after it is issued.

Accessing a Wholesaler through a Broker

To gain access to a wholesaler, you also have the option of electing a mortgage broker. A broker will work for you, while a correspondent will work for the lender itself. As a result, your broker can present you with options for a number of different wholesale lenders to choose from. You will receive some guidance from the broker in making your final decision. The broker's main job is to facilitate the deal of your choice, however, meaning you retain the ultimate power to decide which lender most appeals to you.

Direct to Lender Pros and Cons

Using a wholesale lender correspondent will gain you access to one lender specifically. From there, you can be proactive in negotiating fees and costs associated with your loan. The correspondent is a direct link to that lender. When you go straight to a lender, however, you will not be able to cut out a middleman entirely. Since wholesale lenders use correspondents to source their mortgages, you will have to pay the correspondent a fee. As a result, the savings you get from going direct to the lender may be partly compromised. Many borrowers think using a wholesale lender will cut down closing costs. However, all loans have similar closing costs.

Broker Pros and Cons

When you use a broker, you are able to shop around for your loan a little bit more. This means you will have a few more options to choose from. Ultimately, though, when you do find the lender you want to work with, the broker may not have as much negotiating power as the correspondents working direct with the wholesaler. As a result, you will likely face more rigid terms and fees. You will have to pay the broker costs just the same as any mortgage lender, but these costs may be in addition to closing costs on the mortgage. Using a broker can make the up-front expense much larger.

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