subject: Mortgage Brokers Compared to Direct Lenders [print this page] Mortgage Brokers Compared to Direct Lenders
I am going to go over these differences, in this article. But first, I want to pint out the most "glaring" difference....NJ mortgage brokers have MULTIPLE sources of funds for borrowers, while direct lenders have only ONE source of funds...their own funds. Hence, if they don't have a particular program that an NJ home buyer wants, that buyer must go elsewhere. Why do you think that over 85% of loans written in this state and this country, originate from NJ mortgage brokers, and not direct lenders?
As far as service goes, New Jersey mortgage loan brokers are always #1! One stop shopping, so you don't have to. Hence, mortgage brokers can find virtually any program that you desire, while a direct lender is limited only to what his/her specific company offers. In essence, mortgage brokers represent the borrower, NOT the loan program.
Since interest rates change daily, a mortgage broker can lock a certain rate on one particular bank, then "float" a rate at another bank. talk about having your cake and eating it too! Brokers can protect the borrower, in ways that Direct Lenders cannot.
The new year often brings about quite a bit of change. One such change is the new down payment requirements for New Jersey FHA loans. that's right...FHA mortgage loans in NJ now require a down payment of 3.5%, up from the 3% held for over a decade. FHA NJ mortgage loans had a reputation of also being a loan for the borrower whose credit score was less than par. This is still the case...sort of. People around here generally like a sure thing, that is, they like to know exactly what their mortgage payment is going to be every month. When someone gets an adjustable rate mortgage product, their rate moves up and down violently when we face tough economic times in this state. And becasue home values in New Jersey are still pretty high, and public companies' stock is still very volatile, NJ residents generally do not choose the ARM programs.
The remaining 10% of home owners in NJ, seem to choose some type of a "balloon" mortgage program. These are the keystones of our economy in the US, and locally in New Jersey here.
The way the Fed achieves these goals, is by raising or lowering the short-term and long-term interest rates. That affects the rise and fall of NJ mortgage rates. More emphasis on the short term interest rates, however. By doing this, the Fed indirectly influences demand for goods and services in NJ and the rest of the US. This, in turn, influences the economy as a whole. It is not hard to understand the concept of how this all works: if interest rates are lowered, borrowing money to make purchases becomes less expensive, and people are more apt to make purchases. And the spending of money, spurs growth in the US and on the local front, New Jersey.
BUT, if the case is that there is too much money in the economy, people tend to spend more and demand increases more rapidly than supplies of goods can keep up. Prices rise to quickly and all of a sudden, supply is short and here comes inflation! And on the contrary, if there is too little money out there, people spend less and economic growth slows way down or completely stops, in some extreme cases.
