Home loan seekers are presented with two viable options — a mortgage lender and a mortgage broker! You can only choose one based on your financial condition and capacity. But choosing the best option is easier said than done. Not to worry, this article will point you in the right direction!
Who is a Mortgage Broker?
A mortgage broker acts as an intermediary between loan seekers and lenders. They help people get access to loans and investments. A broker doesn’t use their funds to facilitate mortgage loans, rather they pair their clients with the best lenders, and give them reasonable quotes from a list of verifiable lenders. Some lenders even help their clients get loans with poor credit scores.
They consult with their clients to gauge their financial needs and status, then use the information to find an ideal lender for them. They collect the necessary financial information required by lenders (from their clients) to advance the mortgage. These include income, tax returns, asset and investment data, credit reports and pay stubs.
Upon getting the required information, they present it to the lender for loan approval. But their job doesn’t end there, brokers also act as the point of communication between the lender and borrower all through the application and approval process. This is to say, that lenders do not maintain direct contact with the borrower but with their broker.
- You are not limited to one lender and can access multiple at a go
- You get a good overview of your lending qualifications
- Spares effort, time and stress
- It is flexible
- They help you get loans even when your credit score is nothing home to write about
- Interest rates and closing costs might be higher
- You may have to pay a broker’s fee ( My Finance Broker is an exception).
Who is a Mortgage Lender
A mortgage lender or direct lender is a financial institution that provides mortgage loans. A mortgage lender could be a bank or other financial entities like credit unions and popular lending companies. Unlike mortgage brokers, they use their own funds to facilitate the mortgage. Their loan officers, underwriters and processors all come from the same company. They sometimes offer good interest rates and a lower closing cost.
- You have direct control over the application process
- You may get better rates and lower closing costs
- Some mortgage lenders offer “direct-only” deals that a mortgage broker cannot provide.
- You don’t have to pay broker fees, which saves cost
- Your lending options are limited to the lender’s services and programs
- If you have a poor credit score, you may not easily find a mortgage lender
- If you get more than one rejection from mortgage lenders, it may lead to multiple credit inquiries which can negatively affect your credit score
What Is The Key Difference Between Both?
When scouting for a home loan, a mortgage broker steps in and finds a suitable lender for you, while a mortgage lender offers the loan to you directly without a middleman. With a broker, you don’t have to lift a finger to complete paperwork and the loan application processes required, but with a mortgage lender, you are directly involved in the negotiations and approval process.
Which Should You Choose?
There are no set rules for choosing either a mortgage broker or lender. The option that is best for you is dependant on your personal financial needs and circumstances and the effort you are willing to commit to the process. If time is a luxury you cannot afford or if you’d prefer to work with an expert who knows the market better than you do, we highly recommend that you work with a mortgage broker. But if you can count on a direct lender with good rates, then, by all means, go for it. While direct lenders might offer lower closing costs and interest rates, some reputable mortgage brokers like My Finance Broker offers the best interest rates and forego brokerage fees. That said, the ball is in your court.