As Mortgage Brokers, we have numerous lenders competing for our clients’ business. Often, you will meet with your broker to sign your mortgage documents and you will not recognize your mortgage lending company.
Why is this?
Broker or “Virtual” lenders that only deal with brokers or existing clients direct, can generally offer a lower rate and also a lower penalty calculation. This is because instead of spending millions on Advertising and Sponsorships, they retain their capital to pass along the savings to the customer. They also do not have the overhead of having numerous physical branches. They pay brokers based on the mortgage size to be their mobile representatives. The brokers are independent contractors so the lenders aren’t required to pay for benefits, etc.
Every lender has different specifications for their lending criteria. For example, you may be declined at your local bank because you need child tax to qualify. Some broker lenders are more flexible for clients that own multiple rentals, as well. It all depends on your situation as to why your broker has chosen your specific lender.
90 percent of broker lenders have financial backing from major financial institutions. While they don’t make it publicly known, you will often see a virtual lender team up with a major bank to offer bank accounts or other products.
What happens if my lender gets Purchased by another Lender?
You may receive a notice mid term that your lender has been purchased by another financial institution. This is common and generally it is business as usual with these lenders. They purchase the contracts and adhere to the original terms of the mortgage. The only difference is that you will have a different company servicing your mortgage.
At the end of the day, if you have a great rate and product, most clients generally don’t care what their lender name is. A good broker will always explain why they chose a certain lender for a client and the client should be able to reach out to their broker or their lender at any time for great customer service.