Myth # 17: Direct lenders can get me the best deal
Direct lenders advertise themselves as being preferable loan sources by giving mortgage shoppers the impression that direct loan rates are lower than those offered indirectly. However, most mortgage shoppers are not aware of the fact that there is little to no difference between direct and indirect loans. Direct loans are not necessarily cheaper, faster, or better than indirect loans. In fact, the primary purpose of the term direct loan is to help a lender maneuver the difficult task of differentiating itself from other lenders when comparing loan rates side by side.
A direct lender, in simple terms, is a lending institution that loans out its own money and then uses its own resources to service the loan and collect the payments. Under this definition, banks and credit unions can be considered direct lenders. Think of the term “Direct Lender” like a dry cleaner’s “In-house” cleaning as opposed to sending to an outside plant.
There are a few advantages to using a direct lender. For example, jumbo loans are typically kept on the lender’s books and the costs of underwriting are lower when using a direct loan. However, while these facts are advantageous, they do not actually lower the cost of the loan rate. Many borrowers wrongly assume that if they cut out the middleman and use a direct lender that they will save money. Unfortunately, this is not true. Regardless of if a loan is direct or indirect, the mortgage shopper will still have to go through a commissioned loan officer to acquire the loan, which can add to the expense of the mortgage rate.
The best way to get a good mortgage rate is to compare mortgage rates and lenders using the Parlend mortgage calculator. Shopping for mortgage rates can be a complicated process, regardless of if you are looking for a direct or indirect lender – opting to shop for mortgage lenders anonymously and online can help you to find the best possible rate according to your own individual risk profile. Parlend offers mortgage shoppers the advantage of allowing them to compare rates between a wide range of lenders – regardless of if those lenders offer direct or indirect mortgage financing.