If you’ve ever applied for a mortgage, or are planning to do so soon, you should be aware that there are a number of ways lenders and clients connect with one another.
First, lenders reach you by way of channels. There are two basic channels. The first is the retail channel, while the other is the wholesale or mortgage broker channel.
The retail channel is just as it sounds. You may walk into a branch of a bank, fill out an application and the entire mortgage process happens under one roof.
When you go to the closing table, the money you get from the lender, to either give to the seller or pay off your old mortgage company in the case of a refinance, comes from the bank’s own funds.
The broker channel is different.
Mortgage brokers, just as the name implies, broker out loans from their clients to different lenders. The processing of the loan, depending on the arrangement between the broker and the lender, will often be handled at the broker’s office. When it comes time to go to the closing table, though, the money will come directly from the lender, versus the broker.
It is possible that a lender like a big-box bank will operate both channels simultaneously, and those separate channels will compete against one another for your business – either directly to you or through a broker. This is good for you as a consumer, because you have options when you shop for a mortgage.