If you need help finding solutions, a mortgage broker could help you compare options with many different lenders. If you're already loyal to a bank or if you want to compare prices on your own, opting for a direct lender might be the best option. Whether you should work with a direct mortgage lender or a broker depends on your individual finances. But in general, if you have a strong credit score with no late or late payments on your credit reports, you can expect to pay lower fees when you work directly with a mortgage lender.
However, if your credit isn't perfect and you might need a mortgage with bad credit, a broker could find a loan with a lower mortgage rate. And if you're struggling to qualify with a mortgage banker or a non-bank lender, a broker, who works with several lenders, could find an originator who approves you. Both brokers and lenders can provide you with the money you need for your home loan, but everyone works differently to achieve that goal. Here's a breakdown of the differences and how to make an informed decision for your company.
The best route for you could come down to if you already know a good mortgage broker or a bank loan officer. If you have an opinion about a great broker or banker who is knowledgeable and trustworthy, or if you've had a good experience working with your bank to get a loan in the past, that could tip the balance. 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. 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.
To do this, a mortgage broker sits down with his clients to assess their needs and their financial situation. Phil Shoemaker, commercial director of Home Point Financial in Ann Arbor, Michigan, said that working with a mortgage broker can save borrowers money. Consumers should always compare prices to find the lowest cost when applying for a mortgage, he said, and working with a mortgage broker can make this process easier. Anthony Casa, president of the Philadelphia-based Association of Independent Mortgage Experts, said brokers can help borrowers get as much housing as possible for their money.
Mortgage brokers don't anticipate loans, but instead offer a one-stop shop with access to several lenders, while a direct lender is a single entity that eliminates the middleman. A good mortgage broker should be able to provide valuable information, such as which lenders lend money in certain areas, which offer a specific type of mortgage, and which ones accept or avoid loan applications for certain types of homes, such as cooperatives, condominiums or multi-family homes. This could help you determine right away if your bank or a mortgage broker is likely to offer you the best rates and terms. Skipping a mortgage broker can mean going through the application process with more than one direct lender.
Brian Ma, broker for Flushing Real Estate Group in Flushing, New York, said he advises his clients with strong credit to look for mortgage lenders. This is because brokers work with several lenders, just as insurance brokers can offer policies from a variety of insurance companies. People who are less qualified buyers or who buy less traditional properties will find it easier to find loans for which they can be approved through a mortgage broker than through individual direct lenders with generally stricter approval criteria. Mortgage brokers once had a risky reputation, so it's no surprise that many people are still hesitant to use them.
Mortgage brokers can also work with borrowers who have difficulty obtaining approval through the automatic underwriting process from direct lenders due to a recent bankruptcy, poor credit, or unstable employment. .