Pros and Cons of a Mortgage Broker
December 14th, 2018
December 14th, 2018
On our homepage, you may have noticed our statement, “A mortgage broker does 1 thing and does it better than anyone else… He shops for great deals on mortgages.”
But what if this would be your first opportunity to work with a mortgage broker?
How would that experience differ from working directly with a lender? If you have never worked with a mortgage broker before, however, you may not be certain what a broker is or how using one differs from working with a direct lender. How do you know which one to choose?
Let us suggest the following analogy to better understand the difference. Have you ever been to the library? This of a library with hundreds of books. Each book is a lender. The pages of each book are filled with all the various loans, programs, features, pricing etc. Could you go to the library and read a book? Could you read two books? Some books might be a quick read… quick like a rocket! But there is a person at the library. The librarian knows every book in the library. There is a chance…. maybe a good chance… the librarian could talk to you for a few minutes and tell you exactly which book is best for you.
It is probably obvious to you, but in the scenario above the librarian fulfills the role of a mortgage broker. Because the librarian works at the library every day and works with books every day, she can recommend the best books. The mortgage broker is the same. You can select a lender on your own. And, some borrowers may be able to do this with complete confidence in their own ability to expertly operate in the complex field of mortgage lending. Seriously, how often do you talk to the librarian? But this isn’t just a book, this is connected to the largest debt most Americans incur. Maybe if your next library book was that important, you would talk to the librarian. Thus, the mortgage broker.
1. In order to lend money directly, a mortgage company hires an underwriting department, closing department, funding department etc. All these necessary roles are born out of the fact that it is THEIR MONEY paid out at closing. So, underwriting and funding are essential components of direct mortgage lending. A broker does not underwrite and fund loans. A mortgage broker submits a client’s application to a specific lender to fulfill these parts of the transaction. In the end, it is not the mortgage broker who uses their own funds but rather a lending partner’s funds to close the loan.
2. Due to government regulations, mortgage lenders and mortgage brokers are treated differently in how the cost of the loan is revealed to the borrower. The rules require more transparency on the part of the mortgage broker than is required by a mortgage lender.
3. Mortgage brokers will not be involved with the servicing of your loan after closing. If you have had a mortgage loan before, you are familiar with the fact that all loans are made so that they can be sold after the closing. So, using a direct mortgage lender is not a guarantee they will service your loan for the duration. They may. They may not. A mortgage broker will not because, in almost all instances, that is not part of the mortgage brokers business.
4. As you can see, the mortgage lender may have an extensive business which employs many different skilled individuals: Originators, Account Executives, Account Managers, Underwriters, Closers, Funders, Managers (you get the point). The mortgage broker will likely not have many of those positions. Typically, there is the mortgage broker who fulfills the role of originator. Many mortgage brokers hire or contract with processing services to help speed the process along.
It would be easy for us to say that you should always choose a mortgage broker, considering that we are one. But we want you to be fully educated about all your options.
Below, you can read about both the pros and cons of using a mortgage broker rather than a direct lender. Hopefully, this will guide you in deciding which is right for you.
You can see that mortgage brokers are different. Both operate within a key space of the mortgage industry. Overall, you should be able to avoid potential drawbacks simply by doing your homework before you select a mortgage broker to work with.
When shopping for a mortgage broker, check reviews to see what other customers’ experiences were like. Were the good-faith estimates they were given typically accurate? Did the broker pressure them toward expensive loans? Have they been satisfied with their loans over the long term?
If you can avoid these drawbacks, you should find that the advantages are well worth it. The mortgage broker can save you valuable time and expense while also reducing hassles and stress. By reaching out to their network, they may also be able to connect you with a spectacular offer which you would never otherwise have come across.
At Grandview Lending, we put our customers’ interests first, and strive to connect Indianapolis homebuyers with the most affordable and flexible home loans. To get started today, please call 317.255.0062. We look forward to bringing you the most competitive offers from our network of trusted lenders.
Previously, we talked about how choosing your next book to read at the library isn't as big a decision as choosing your next mortgage. That is certainly true. But libraries house vast amounts of knowledge, and that part of the metaphor is applicable as well. The book you choose to read next does matter, because it broadens and deepens your knowledge. Thus, getting a recommendation from the librarian can empower you.
The same is true with a mortgage broker--but in a much bigger way. The broker, like the librarian, has access to a huge amount of information. If you find a broker you can trust, that broker's knowledge and access can empower you to make a smart financial decision. And when the broker connects you with the most ideal loan for your needs, that mortgage can empower you to achieve your financial goals.
We provide our clients with exceptional service and integrity which has become our hallmark.