A mortgage broker is an individual or a business that discovers and arranges financing for their clients. I’m a mortgage broker and my fiduciary responsibility is to you. There are multiple places to obtain a home loan from your local bank to an online lender but a mortgage broker has distinct advantages that other lending sources simply don’t have. What are those advantages? Here are seven reasons you should use a mortgage broker.
1: Independence. A mortgage broker is not provided a list of loan programs and rates each day from a single source. A mortgage broker works independently for you, the borrower. We are not required to submit a loan application and supporting documentation to a single source but have the ability to review multiple sources for home loans.
2: Local Contact. When you first work with a mortgage broker it’s likely you were referred by someone else, such as your real estate agent or a coworker. As your loan officer, you’ll establish a working relationship who is here to answer your calls and queries. You work with someone who knows the area with years of experience placing home loans and preapproving clients. You’ll never be handed off to a customer service agent some three time zones away.
3: Master of Overlays. Over the past several years the term “overlay” has become an oft-used term by mortgage companies. An overlay means the lender has added an additional approval requirement beyond what secondary guidelines ask for. An applicant can apply for a loan at one mortgage company and get declined while applying at another mortgage company for the very same loan program and get approved. How does this happen? Overlays. One lender added additional qualification guidelines while the other stayed true to the original requirements. As your loan officer, I know which lender to send your loan to.
4: Best Rate. A mortgage broker has marketing agreements with multiple mortgage companies who work with me to market their loan products. And while mortgage lenders will always have rates and terms that are similar to one another, interest rates can vary. Not by much, but vary nonetheless. One lender might offer 4.125% while another 4.25%. I have the ability to review multiple loan offerings and send your file to the ideal lender.
5: Best Program. Along with searching for the better rate, a mortgage broker searches for the best loan program. Most every bank offers the same suite of loan programs but other lenders can also offer other types of mortgages, many of which you may not be aware of. I get promotional materials all the time from different mortgage companies introducing new loan programs that fit a specific market niche.
6: Lower Cost. Not only do we research the ideal loan program, rate and fees, it doesn’t cost more to work with a mortgage broker. Quite the opposite, actually. When we set up a marketing agreement with a mortgage company we begin receiving daily interest rates from that company. These rates are issued to us on a “wholesale” basis, lower than what is currently available at any local bank. When we quote an interest rate, we quote the “retail” or “market” rate. Because we have multiple marketing agreements, it’s likely our rate and terms will be better than working directly with your bank or mortgage company.
7: Access to Portfolio Product. Nearly 80 percent of residential home loan programs are either government-backed or conventional. When a mortgage company approves a loan using existing standards the loan can then be sold into the secondary market. Selling the loan frees up more cash to make still more home loans. Yet there are loan programs that fall outside the traditional mix of mortgages and the loan is not sold but kept in-house by the issuing lender. When a lender identifies a specific market that is underserved but deserving of a mortgage, a lender can construct a program that meets that demand. The loan is not sold but kept in the lender’s portfolio. As a mortgage broker, we have access to portfolio products that other lenders do not have.