Should I Work With a Mortgage Broker?
You should consider using a bank loan officer or a mortgage broker if you plan on buying a home. Here’s what you need to know.
Mortgage shopping can be an overwhelming task. There are many mortgage lenders and a variety of ways lenders can adjust home loans to make them look lower than they actually are. You may also feel vulnerable as lenders scrutinize your credit report while you’re excited to own a new home. In many cases, home buyers are trapped in bad mortgages because they just wanted to get the process over with. Sadly, that’s a big mistake: Even fractional percentage points are enough to add up to thousands of dollars for a 30-year mortgage.
What does a bank or Credit Union loan officer do?
Bank loan officers are employed by a specific bank or lender and often receive volume incentives when they provide clients with loans from a single bank’s or lender’s branches.
You can apply for a mortgage by walking into the bank or credit union in your area and sitting down with a loan officer. They will consider your application and, hopefully, present several loan options tailored to your situation. If you’re a loyal customer, you might get a wonderful deal from the bank.
The best mortgage rates are often offered by small local banks and credit unions. The problem is that many of these institutions only lend to consumers with excellent credit scores. If such a requirement isn’t met, many first-home buyers simply won’t qualify since they don’t have long enough credit histories.
However, let’s say your bank offers you a loan. But how do you know it’s the best deal unless the bank offers a lower rate than national averages? So you go to another bank to get a quote, or you go to a mortgage broker.
Mortgage brokers
They are responsible for connecting borrowers with lenders. Usually, they work for more than one lender and earn commissions on each sale. The same way talent agents show aspiring actors to films, mortgage brokers present applicants to different lenders.
The best mortgage broker will work to find borrowers with less-than-perfect credit, the lowest rates and also the cheapest mortgages. The broker gets paid more when the loan is more expensive. Additionally, brokers may not want to show you the absolute best loans (although I am not saying they all do this).
So shop around and make sure to negotiate as you would with a home or car: Don’t be afraid to push for better terms and don’t just say the first thing that catches your eye.
Mortgage Broker Vs Loan Officer
Mortgage brokers work with a variety of lenders to offer borrowers a variety of loan programs. In return for a fee or commission, brokers connect borrowers with specific lenders and loan programs that match their needs.
A loan officer, on the other hand, works for a specific institution, like a bank, and has access to the products that they offer only via that institution. That is why mortgage brokers offer borrowers a much wider variety of loan programs than banks—including less-known institutions that might offer better terms than well-known banks.
How a Mortgage Broker Work
Maybe you want to buy a house, but you lack an existing banking relationship, or you don’t like the rate your bank is currently offering. You can consult a mortgage broker who works with many lenders to identify the best loans and competitive rates from a variety of loan programs.
As well as saving you time, you’ll also save money by utilizing a mortgage broker. Instead of sifting through complicated loan offers among several lenders, you use a broker who determines what you qualify for and does all the work for you.
Brokers then help the buyer to obtain the necessary documentation and guide them through the underwriting and application processes. The broker earns a lender commission or borrower fee based on the broker’s fee structure, and whether it is paid by the lender or borrower.
Finding a Mortgage Broker
Many mortgage brokers are independent and work out of small offices or from their homes, so finding a good broker usually involves asking friends or family members for referrals or looking in a local telephone directory.
Final Tips
Research at least two of the three options: a local bank or credit union, a mortgage broker or an online broker. When shopping, compare apples to apples. Ideal would be if you can compare loans that are for the same term and amount with the same down payment schedule. Then, compare detailed information on closing costs, points, and fees.
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