Brokers have access to loan programs and interest rates from a variety of lenders. They can provide a better, more specialized product to those who need it. Obtaining a mortgage is a time-consuming process. Even after doing all the due diligence to find the right bank for you, the loan application and closing process is intense, with a lot of back and forth and requests for documents you swore you'd already provided twice.
Usually, a mortgage broker will handle paperwork and disputes with lenders on your behalf; a good mortgage broker will save you time and stress. While they can provide services to people seeking home loans, they are very different. A mortgage broker acts as an intermediary by helping consumers identify the best lender for their situation, while a direct lender is a bank or other financial institution that decides if you qualify for the loan and, if so, delivers the check. Getting prequalified for a mortgage with both a bank and a mortgage broker can help you understand your options and compare offers.
While an offer may change once you submit an actual loan application, prequalification will give you a good idea of the rates and terms you can expect. This could help you determine right away if your bank or a mortgage broker is likely to offer you the best rates and terms. So which one do you choose? A full-service bank ensures that your loan stays with the same company for the entire term. Make sure the bank is servicing its own loans.
On the other hand, a mortgage company can offer quick closures, product availability, and experience in loan originators. However, the individual is often the most important aspect of mortgage lending. Both types of companies have fantastic, knowledgeable loan originators. The application processes can also be very different.
A large bank might simply tell you that your credit rating is too low, while a broker can explain how a credit rating works. The main difference is that a mortgage broker from a bank represents only the products offered by their institution, while a mortgage broker is an intermediary who works with several lenders and the lenders pay him a referral fee. Mortgage brokers are regulated in Ontario by the Financial Services Commission and require a license. Because brokers are intermediaries with thousands of relationships with lenders, their competitive advantage is found in atypical and niche mortgage situations.
Mortgage loan originators go through very different processes between federally authorized banks and mortgage companies. However, brokers continue to play an important role in the industry and can be very beneficial to both prospective homeowners and those looking to refinance a mortgage. Conversely, if you know what you're doing and have obtained a mortgage in the past and have a fairly simple loan, online direct-to-consumer mortgage lenders might be the best option, at least in terms of pricing. Specialty lenders that only provide home loans such as Rocket Mortgage or Better Mortgage are generally included in the category of banks.
If you prefer not to receive dozens of calls from brokers, you can search for them directly through sites that bring together local and independent mortgage brokers from all over the country. Some lender sites, such as Rocket Mortgage, also have a search engine that will connect you with local mortgage brokers. A popular way to find a mortgage broker is to ask a friend for a recommendation, especially in atypical homebuying situations. In short, mortgage brokers may be a good option if you're looking for a home loan, but you should always compare their rates and services with those of your local bank and credit union to insure yourself.
Mortgage brokers tend to be more localized, so the best place to start your search is to ask friends, family, and your real estate agent for recommendations. When a prospective homeowner is ready to seek a mortgage, they may decide to consult with a mortgage broker. An agent can pre-approve your mortgage, but can't issue a final mortgage approval without the lender's help. Mortgage brokers don't anticipate loans, but they do offer a one-stop shop with access to several lenders, while a direct lender is a single entity that eliminates the middleman.
Mortgage lenders handle all the functions related to starting a mortgage and obtaining money to close it. Some of the best and most important mortgage lenders are even trying to digitize the entire mortgage process. . .