Question:

How to become a direct lender?

Answer:

While requirements for becoming a mortgage broker can be affordable and easy to meet, how to become a direct lender is an entirely different thing.

There are a few things a mortgage broker will stumble upon when deciding to upgrade to a direct lender. The biggest obstacles are the initial audit and high net worth requirements.

Why is it so difficult to become a direct lender?

A direct lender can be a correspondent lender, or a commercial bank, or a mortgage portfolio holder. All they underwrite, process and close loans on their own judgment and with their own funds. A mortgage broker may pretend to be closing and funding your loan, but they cannot do anything without the approval of the direct lender they are closing the loan for. A mortgage broker may not tell you they are a broker until you inquire. Also, a company may be serving as a direct lender in some states, and as a broker in others.

However, becoming a direct lender will require that the mortgage broker goes through a scrutinizing audit. Not everyone will be approved after the audit since they may have not documented properly their practices, or predatory lending cases have been discovered.

Also, the usual net worth requirement to become a direct lender is at least a $200,000 in most states. And can everybody get a warehouse line of credit? Hardly.

An easier way to become a direct lender is to find a direct lender that would like to expand and has been in business for several years, and sign with them as a branch. Thus, you could operate as direct lender and mortgage broker at the same time.

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