TrueFi Difference

Currently, consumers obtain a home loan through either a lender or traditional mortgage broker.

Now, there is a new way for borrowers to obtain financing.

Let’s take a look at the differences.

Lender

Lenders are banks, mortgage banks, or other financial institutions. These institutions offer loan products through various channels such as local storefronts and online.

Borrowers only have access to loan products offered by the lender. To compare loan offers from different lenders, borrowers would need to correspond with multiple lenders. In this scenario, lenders incur costs associated with originating a loan.

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Mortgage Broker

A mortgage broker is a middleman who is paid to bring together borrowers and lenders. They assist borrowers in gathering information and documentation required by lenders. The borrower’s information is then presented to different lenders to determine which loan offers they qualify for. The borrower then chooses the loan offer which they think is the best. The broker submits the loan request to the lender for final approval and funding.

Mortgage brokers are compensated an average of 2% of the loan amount and may also charge a processing fee.

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TrueFi

TrueFi is not a lender or your traditional broker. TrueFi provides easy-to-use online tools and services that assist borrowers in preparing loan requests and grants borrowers direct access to a network of lenders and their loan offers for the purposes of obtaining a home loan.

Click here to see how it works.

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Compare

Let’s compare the TrueFi difference for a refinance of $150,000 at a 30 year fixed rate.1

Interest Rate

Fee

Lender Fees

APR4

Description

TrueFi

3.750%

$750

$1,000

3.805%

TrueFi charges a fee of 1/2% of the loan amount.

Traditional Mortgage Broker
(Fee paid by consumer)

3.750%

$3,495

$1,000

4.000%

When a mortgage broker is paid by the consumer, the average broker fee is 2% of the loan amount ($3,000)2 plus an average processing fee of $4953.

Traditional Mortgage Broker
(Fee paid by lender)

4.000%

-

$1,000

4.055%

When a mortgage broker is paid by the lender, the broker is compensated 2% ($3,000) through a higher interest rate.

Direct/Online Lenders

3.875%

-

$1,500

3.958%

Lenders incur costs associated with originating a loan. These costs are recovered through higher rates and/or fees.

1 This scenario is only an estimate and is meant to serve as an example. It is based on 0 points (assumes consumer will not incur costs to get a lower rate). Average lender closing cost fees used from Bankrate.com 2011 Closing Cost Survey.
2 http://www.bankrate.com/finance/mortgages/want-your-mortgage-wholesale-try-an-upfront-broker.aspx
3 Bankrate.com 2011 Closing Cost Survey
4 Annual Percentage Rate. This is the effective rate of interest that will have to be paid on a loan. It is taken as a percentage and calculated as a yearly rate. It is usually different and higher than the advertised rate because it includes one-time fees and other costs which help to determine the total cost of borrowing. It is a measure to compare different loans offered by competing lenders taking into account both interest rate and closing fees.
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