Direct Lender vs Broker: What’s the Difference?
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November 27, 2023

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One of the biggest general pieces of advice for mortgage borrowers is to shop around for the best deal.

To perform the legwork involved in this process, some investors choose to work with a mortgage broker.

However, working directly with a lender eliminates the need for a third party in a mortgage deal, and allows lenders and investors to build a partnership.

In this article, we’ll explore the difference between direct lenders and brokers, including their distinct roles and the decisions involved in whether to use one.

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What is a direct lender?

Direct lenders are companies or financial institutions that provide loans directly to investors without the involvement of intermediaries such as brokers.

They’re responsible for everything from processing the loan application to underwriting and servicing loans.

Traditional vs. hard money direct lending

Direct hard money lenders such as Park Place Finance specialize in asset-based loans that are typically used for real estate investments like fix-and-flip projects or income-generating properties.

Direct lenders can offer a more personalized and efficient lending experience, with a strong emphasis on building partnerships with borrowers for years of deals to come.

Unlike traditional loans, hard money loans are more focused on the value of the property (the collateral) than the borrower’s income or credit history. 

This makes hard money loans more accessible to investors.

Park Place Finance uses in-house capital to fund our deals.

What is a mortgage broker?

A mortgage broker is a third party that acts as a liaison between borrowers and lenders.

One of the main reasons investors choose to use a broker is to find a deal on a mortgage, including more favorable rates and terms.

A broker can “shop around” for a mortgage on an investor’s behalf, and can find lenders that match the borrower’s needs and financial situation.

They also can help investors complete paperwork and negotiate on their behalf.

Mortgage broker considerations

Working with a mortgage broker often is considered a time-saver because investors trust the broker’s expertise and network of lenders.

However, investors must understand that brokers may charge fees for their services, and they may have preferred lenders with whom they work.

As a result, there could potentially be a lack of transparency if you don’t do your homework on your broker.

How do the roles of a direct lender and broker differ?

Direct lenders work directly with investors throughout the loan process, while a mortgage broker works with a lender on the borrower’s behalf.

Mortgage brokers may work with many lenders. When you choose to work with a broker, they will find a lender for you based on your needs.

Direct lenders work one-on-one with the investor throughout the entire loan process, from application to closing.

Direct lenders like Park Place Finance maintain open communication before, during, and after a deal has been funded. 

We will even help you compare your next properties and find the right projects that fit your investment goals.

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When would you choose a direct lender vs. broker?

The decision to choose a direct lender vs. broker depends on an investor’s individual needs.

Investors who lack the time or experience to navigate the loan process on their own may choose to work with a broker to gain access to their resources and solutions.

On the other hand, many types of borrowers benefit from working with a direct lender to reap the rewards of an individual partnership.

Real estate investors and direct lenders vs. brokers

Real estate investors in particular often require more control over the loan process. 

It’s also crucial to build a relationship with a hard money lender to access the most favorable rates and terms.

Working directly with a hard money lender can provide borrowers with rapid access to the capital they need to fund time-sensitive deals.

That’s not to say a broker can’t help streamline the process for some types of borrowers — but generally, a direct line of communication with a lender will result in an overall faster process.

Is it better to use a direct lender or broker?

Investors ultimately want to find the best deal.

When you’re trying to determine whether to use a direct lender vs. a broker, keep in mind that the same work you put into finding the right lender should be put into finding the right mortgage broker.

Either way, it’s crucial to understand how the broker is compensated and whether they only work with certain lenders—and whether only certain lenders will work with them.

It’s also a good idea to compare the offers from a broker against your own inquiries with lenders to ensure that you’re actually getting a good deal.

Working directly with a lender will eliminate the need to take these extra steps because you can compare the deals yourself and work to build a relationship with the lender.

Can a direct lender work with my existing broker?

If you already have a broker, Park Place Finance can work with them.

We also can legally pay broker fees so your existing broker or lender doesn’t get cut out of the deal.

Connect with Park Place Finance today

Park Place Finance is here to partner with you. 

When you choose to work with us, you can rest assured that a team of real people will be dedicated to funding your deal as quickly as possible.

We’re a direct hard money lender with in-house capital and have funded over $1 billion in loans since 2006.

Park Place Finance offers the following loan products:

Depending on your loan type, we can close on your loan in a matter of days or weeks.

We lend nationwide, including 47 states for fix-and-flip loans and 42 states for DSCR loans.

In addition to working with a dedicated account executive throughout the process, we have dedicated departments for underwriting, processing, and servicing to ensure a fast, streamlined process from start to finish.

Get started by filling out our simple online form. 

Once submitted, you’ll hear from your dedicated account executive soon. Or, you can call us at 866-407-1599.

We look forward to working with you!

Photo by Kindel Media

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