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Correspondent Lenders : Another Option of Home Financing

Buying a home is a major financial commitment. How you finance the home purchase can mean a difference of thousands or tens of thousands of dollars over the life of the home mortgage loan. Where you get the money to buy your loan is a very important consideration.

The first place many home buyers look when financing a home purchase is their local neighborhood bank. After all, you probably already know the people at your local bank and have an ongoing relationship with them. What better place to go for the money you need to buy your first home?

Before you go with a local bank, however, you may want to consider the alternative of mortgage brokers. Mortgage brokers have access to mortgage loans from many different sources, and as such they can often obtain lower interest rates than you could obtain from your local bank.

In addition to these two sources of financing for a home purchase, there is a third option. Correspondent lenders combine the best features of a local bank with the best features of a mortgage broker to provide an excellent resource for the home buyer.

In order to understand the unique features of each type of home financing, it is important to understand how each source works. With local bankers, the mortgage loan officer works from a rate sheet provided by their headquarters. This rate sheet dictates the interest rates they can quote to their loan applicants. A bank may be somewhat limited in the interest rates they can offer because they need to build a profit margin into all their loan vehicles.

Mortgage brokers help mitigate that issue because they are not lending the home buyer their own money. Mortgage brokers are free to shop around at many different sources to obtain the best interest rate and terms for the loans the provide. The mortgage broker makes their profit by getting the loans at a discount and marking them up, thus making a profit on the difference. Mortgage brokers typically have a wider universe of loans to choose from, and can thus get lower rates than most banks.

The third option is known in the industry as correspondent lenders. Correspondent lenders combine the best features of mortgage brokers and the best features of banks. Correspondent lenders are similar to bankers in that they make the decision on whether or not to loan the money and they fund the mortgage loan with their own money. Unlike banks, however, the loan is sold to another lender immediately after it is closed. This allows the home buyer to take advantage of the best of both worlds. He or she can get the lower interest rates offered by mortgage brokers, coupled with the convenience and local decision making of the local banking relationship.

Correspondent lenders tend to be smaller institutions which operate on a regional basis. These small but powerful institutions are well worth the time and effort it takes to find them. Don't overlook this important alternative when shopping for a home loan.

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Quicken Loans Inc. is the nationís largest online retail mortgage lender and among the five largest overall retail home lenders in the United States. The company closed a record $30 billion in retail home loan volume across all states in 2011. Quicken Loans ranked #1 in customer satisfaction among all home mortgage originators in the United States by J.D. Power and Associates in 2010 and 2011.

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