Mortgage Broker or Lender? Which is Better For You?
You’re ready to submit an application to a mortgage broker or lender probably to start the search for your ideal home. Now you are caught up to choose which is better between two primary sources of mortgage financing, Mortgage brokers, or mortgage lenders with the latter comprising banks and additional direct lending institutions.
The major difference between them? Direct lenders and mortgage banks, as well as non-bank direct lenders, depending on their own funds to finance their mortgages. If you’re applying for mortgage loans through the lender you choose, you’ll collaborate with employees from the company including the loan officer who will submit an application, to underwriters that verify that you’re able to make the monthly mortgage payments.
Mortgage brokers operate a bit similarly to insurance brokers. They aren’t associated with one firm. Instead, they partner with a variety of wholesale lenders. They can therefore provide you with a wider range of loan options.
If you’re deciding to work with a direct creditor and/or a broker will depend on your personal financial situation. In general, If you have a strong credit score, with no missed or late payments appearing on your credit report it is possible to pay less for fees when you work directly with a mortgage lender. If your credit score isn’t perfect, however, you may require the assistance of a bad credit mortgage and a broker could be able to find an option with a lower interest rate. If you’re unable to get a mortgage banker or an alternative lender that isn’t a bank A broker, who has a relationship with several lenders, may be able to locate an originator who will accept your application.
The advantages and cons of mortgage brokers
Phil Shoemaker, the chief business officer at Home Point Financial in Ann Arbor, Michigan, said that working with a mortgage broker could make it easier for borrowers to save money.
This is because brokers collaborate with a variety of lenders, just like insurance brokers are able to provide policies from various insurance firms. However, lenders can only provide borrowers with their own mortgage products Shoemaker explained, and they may not be the most affordable rate of interest or fees.
“Homebuyers aren’t captive to one lender’s interest rate or closing fee,” Shoemaker explained. “They can evaluate the rate and fees of multiple lenders and choose the one they prefer.”
Shoemaker describes the process of searching for a mortgage as compared to buying a big-ticket thing. Customers should look around for the lowest price when they take out the mortgage, he added using a mortgage broker could help with this.
“In no other major purchase would you get one estimate on a service and go with it,” Shoemaker explained. “You’d shop around to find the best deal. That’s what mortgage brokers do. They shop around among several lenders to find the best deal for each customer’s specific financial situation.”
More house for your money?
Anthony Casa, chairman of the Philadelphia-based Association of Independent Mortgage Experts said that mortgage brokers can assist borrowers in getting the best home for the money they spend.
The following example is used by the author for this: Let’s assume that buyers are able to pay a monthly mortgage of $1,564. If they were to settle for an interest rate on mortgages at 4.75 percent with a mortgage lender they could afford the total mortgage amount of around $325,000, without breaking their budget.
If they instead collaborate with an agent for mortgages who can find them a better interest rate of 3.75 percent on a loan with a different wholesale lender, they could be able to afford a mortgage of around $338,000 and maintain the minimum monthly mortgage payment of $1,564.
“That could make the difference between getting their dream home or settling for something else,” Casa explained. “If you want better rates and to increase your buying power, always work with a mortgage broker over a bank.”
The reason why a loan might be more sensible
However, this doesn’t mean that lenders who specialize in mortgages aren’t the best option for all borrowers. Jared Weitz, chief executive director and co-founder of United Capital Source in Great Neck, New York, noted that borrowers with excellent credit usually can get an interest-free rate from the mortgage lender.
If you are able to get a better rate through a lender it’s usually a good idea to go through one rather than the mortgage broker, Weitz said. The reason is that brokers generally charge higher or more expensive charges than lenders, he explained.
If your credit score isn’t great but you have a weak credit score, what do you do? A broker’s help could be worth it even if you’re required to pay an additional fee to the broker Weitz said. It’s because a broker could be able to locate an institution that can offer you an interest rate that is lower regardless of your credit score which could mean lower mortgage payments per month.
“What makes brokers great is their ability to work with any lender,” Weitz stated. “Unlike a bank, they have access to better rates by seeking out different options.”
Credit score good? Direct lending might be more suitable.
Brian Ma, a broker with Flushing Real Estate Group located in Flushing, New York, told me that he recommends to his clients with good credit to look for mortgage lenders. The process of closing a mortgage through one of these firms is usually a simpler process, he added.
“Banks, generally speaking, know their products inside and out, and closing loans with a bank is almost always more expeditious with less of a hassle,” Ma stated.
However, Ma does suggest mortgage brokers to certain clients. Customers who have late or missed payments due on their credit reports could be better off working with an agent, Ma said. People who aren’t able to document the entirety of their income may benefit from by working with a broker Ma explained. A broker is able to share information with a larger number of lenders, and they include those who may not be hesitant when working with borrowers who have financial problems.
The ability to shop a potential loan to various banks and not just one bank is what makes a mortgage broker such a valuable resource for Realtors, explained. A mortgage broker is great for matching the facts on hand with a variety of loan programs.
So finally what’s your take? Mortgage Broker or Lender?
we will be leaving you to make your decision yourself. Your decision might depend on your own perspective of seeing things and also the reason behind your decision.