If you are preparing to apply for a new mortgage loan, you may be trying to decide if you should use the services of a mortgage broker or head straight to a lender or a bank. Some people do not understand the difference between these two options, and other people believe false things about mortgage service offered by a broker. Before you make the decision about how to move forward with your upcoming loan request, it is wise to seek mortgage advice in this area to make the best decision possible about how to proceed.
Mortgage Brokers Cost a Fortune
Some people who extend well-intentioned mortgage advice to you will tell you to steer clear of brokers because they charge an additional and unnecessary fee. This is true actually. You will typically pay another fee for a broker’s service on the closing statement that you do not have to pay for if you apply directly through a lender. However, the broker offers exceptional services that you would otherwise not benefit from if you applied for your loan directly through the lender. Through these services, you may be able to save a substantial amount of time and money. In many instances, those who work with a broker get a better overall deal when all factors are considered.
Mortgage Brokers Do Not Add Value to the Transaction
A common misconception is that brokers do not add value to the transaction, but this is not the case. The value of a broker begins when he or she helps you to set up an affordable loan that works well with your unique needs and goals. There are many loan programs and lenders to choose from, and your broker will typically spend time learning more about your loan request before shopping around for the best loan terms available. Furthermore, the mortgage service continues throughout the transaction. The broker will guide you through the process, answering questions, assisting with paperwork and more so that you enjoy a less stressful process from start to finish.
Lenders Do Not Want to Work With Mortgage Brokers
You may think that a lender would not want to accept a loan request from a broker and that your loan would receive less preferential treatment as a result. However, the lender makes most of its money from servicing and selling the loan rather than from originating it. They do not care how the loan came to them. In fact, they are equally as motivated to close the loan regardless of how it was originated.
Mortgage Brokers Have Preferred Lenders
Because one of the key benefits associated with using a broker is the ability of the broker to shop around for the best loan terms on your behalf, the thought of a broker having preferred lenders can be detrimental. After all, why would you pay the broker another fee only to have your loan options limited? The good news is that brokers get the same fee more or less regardless of which lender they take your loan to. They understand that you are not obligated to use them for their services, so they are motivated to find you the best terms possible and to earn your business.
You Will Have the Best Experience Through a Lender
Another common broker misconception is that you will have a better loan experience when you cut through the middleman and get your answers directly from the source. You may think that the loan process will be faster and that the answers to your questions will be more direct. However, a broker will follow up with the lender on your behalf to speed things up. In addition, the broker will take time to answer your questions and will ensure that you understand the lingo and terms that you are agreeing to.
Mortgage Brokers Do Not Understand Mortgages
Some people view mortgage brokers as less educated than direct lenders. Brokers, however, must be knowledgeable about the products they are selling. They must have great people skills in order to be able to explain the terms to you and to sell the loan programs to you. More than that, there are usually certification or licensing requirements that brokers must obtain and maintain. These may require the broker to take continuing education courses and to prove their knowledge through tests periodically.
Your Rate Will Be Higher Through a Mortgage Broker
A broker can obtain fees for his or her services by charging you an up-front fee or by getting a fee from the lender. In some cases, a broker will get money from both you and the lender. All fees are disclosed in various forms you sign as well as in the closing documents, so you will always know exactly how much the broker is getting paid for his or her services. If the broker gets paid from the lender, this is typically accomplished by up-selling the interest rate. Some borrowers prefer that the interest rate is higher and that the lender pays the broker’s fees for them. Other borrowers want to ensure that the interest rate is as low as possible and want to pay the broker’s fees on their own. First, always ensure that the total fees the broker is charging are reasonable for time, effort and services. Second, tell the broker how you want his or her fees paid. This can be an open conversation with the broker so that you get the loan set up on your terms.
When you apply for your next mortgage, you have the opportunity to use mortgage service from a broker or to apply directly with a lender. If you choose to work with a lender, keep in mind that you should plan to spend ample time shopping around to find the best deal on your loan. It is also advisable that you are familiar with standard loan terms and concepts. While some people can get a good deal directly from a lender, working with a mortgage broker has true benefits. With this in mind, now may be a great time to start searching for a broker to work with.