Many would-be borrowers have a misconception that direct lenders are the only way to go when searching for a real estate loan. While Direct Lenders could be the most logical solution for a loan, they often cannot approve the Borrower's specific loan scenario. As a result, the Borrower could lose a purchase opportunity or, if it was a refinance loan, start all over again with a new lender.
The best of both worlds: The Lendersa® platform allows you to find both Direct Lenders and Hard Money Brokers to select the best loan program for your residential, commercial, or vacant land loans.
Direct Lenders
Lenders with their own money or complete control and authority to approve and fund the loan are considered Direct Lenders. Some Hard-Money Mortgage Brokers with one or more private investors could be regarded as Direct Lenders if the broker underwrites the loan and produces the loan documents under the broker's name.
Mortgage Brokers
Mortgage brokers take loan applications, aggregate financial documents, and transfer them to one or more Direct Lenders. Mortgage brokers usually remain the go-between the Direct Lenders and the Borrowers, advise the Borrowers, and promote/negotiate with the direct lender on behalf of the Borrowers.
Mixed Hats Lenders
Some Direct Lenders could also act as Mortgage Brokers and vice versa; some Mortgage Brokers could also act as Direct Lenders. For example, a Direct Lender, CFS (Custom Financial Services), ordinarily utilizes dedicated Private Investors to fund most of the loans that it gets. Once in a while, CFS gets a loan that it cannot fund right away. Instead of waiting for investors, CFS will refer the loan to another direct lender who could fund the loan right away. CFS is then acting as a mortgage will share the loan commission with the Direct Lender, and the client will benefit from getting the loan fast without the need to search and apply to new lenders
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Who are better, Direct Lenders or Hard Money Brokers?
Direct lenders can quickly approve your loan, but only if your request fits their typically narrow, well-defined type of loan. Hard money brokers are usually connected to several direct lenders, so you can get several approvals to select the best. A good broker will advise you and package your loan for the correct presentation, resulting in funding.
More lenders categories
There are two other categories, often mixed up with lenders' designation these are: Retail Lender and Wholesale Lender
Retail Lender
A Lender who works directly with the Borrower. A Retail Lender can be either a Direct Lender, Mortgage Broker or a Mix Hat Lender.
Wholesale Lender
A wholesale lender is a Direct Lender that only accepts applications from mortgage brokers. The Borrower does not communicate directly with the Wholesale lender but only with the Mortgage Broker.
Wholesale and Retail Combined
Some Wholesale Lenders have a separate retail department that deals directly with Borrowers. Brokers who are shopping for loans for their clients are always seeking only Wholesale Lenders to avoid the Broker Chain.
Broker Chain
A broker Chain is created when there are two or more Mortgage Brokers in addition to the Direct Lender. A Broker Chain adds time to the loan process, but sometimes, it is the only way to fund and close a loan. Brokers don't like Chain because they usually need to cut their commission unless they raise the overall total commission, which may or may not be acceptable to the Borrower. The subject of Broker Chain does not apply to conventional consumer loans of 1-4 units where referral brokers are forbidden. Broker chains are common with commercial loans and hard money on non-owner business-type loans.
Conclusion:
It all depends on the nature of the loan, how complicated or risky it is, and the lenders and brokers you contact. Some lenders are better than others in one year and could be worse than others the next year. So timing is another factor to consider.
What do you recommend doing?
You should contact both direct lenders and hard money brokers, especially if there are issues with the property, the borrowers' credit income, etc.
How many direct lenders and hard money brokers should I contact?
Contact as many as you can without getting too confused. At least 3-5, but you must check over ten lenders for certain loans before selecting one or giving up.
How do I find direct lenders and hard money brokers?
Search the internet and word of mouth for friends, associates, and family recommendations.
Can I use Lendersa® to find direct lenders?
Yes, Lendersa® has an extensive database of direct lenders.
Can I use Lendersa® to find hard money brokers?
Absolutely! Lendersa® members include many brokers who cover a wide range of loan products and are connected with direct lenders and Private investors.
How does Lendersa® help me find lenders and good loan approval?
Lendersa® helps you in 10 areas:
1. Collect all the relevant data about the property and your financial situation to present your loan request in the most favorable light and in a format that matches every lender's underwriting guidelines.
2. Optimize your loan request and give you suggestions on how to trim it and get approved despite being previously declined.
4. Match your loan request with the most relevant lenders and transfer the request only to those lenders who could potentially fund your loan
5. Help you organize the lenders' replies to keep track of your progress.
6. Promot healthy competition among the most qualified lenders to ensure you benefit from a better loan
7. Make it more straightforward to decide on the best loan offer from among the competing lenders
8. Follow up on your loan processing from approval to funding
9. Keep backup offers in case of any changes with the lender before funding
10. No upfront fees and no need to disclose confidential information until the lender provides you with a loan offer
Try the Lendersa® platform to find the best residential, commercial, or vacant land loan programs.
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