When is it Better to Use a Mortgage Broker?
Deciding to use a mortgage broker is a big decision and one that can save you a lot of money. Most people shop around for the lowest mortgage rate, which is a smart move. But it’s not always the best financial move. The truth is, your mortgage is a complex financial agreement that defines every detail of your home loan, including the mortgage rate, interest rate, fees and closing costs, mortgage insurance premiums, refinancing limitations, and even pre-payment penalties. Working with the right mortgage broker can save you time, reduce stress, and almost guarantee you get the best mortgage possible. Here’s why.
Top 3 Benefits of Working with a Mortgage Broker
Homebuyers often want to know, what’s the difference between a mortgage lender vs. a mortgage broker? What are the main benefits of using a mortgage broker? There are several reasons, but here are the top benefits.
1. A mortgage broker can often secure the best interest rate and lower fees.
When you partner with a mortgage broker, they are working on your behalf. Mortgage brokers partner with multiple lenders and have access to a large assortment of loan programs. As a result, they have more flexibility than mortgage lenders and can shop around to make sure you get the best mortgage possible.
2. The right mortgage broker can reduce stress and save you time and energy.
Mortgage brokers understand the complexities of the mortgage industry, and they know how to help you get qualified. Once they have your information, they know which loans are the best fit and which lenders can get offer the best rate based on your application. This reduces a lot of stress for homebuyers and saves you time in the process. When you use a mortgage broker, you can trust them to do the legwork for you. You know you’ll be getting the best rate and best terms available for your home loan.
3. A mortgage broker can help you close on time and avoid mistakes.
When you use a mortgage broker, you are an important client. While mortgage lenders focus on processing loans, mortgage brokers focus on getting their clients the best mortgage on the market. What’s more, a good mortgage broker will work hard to make sure the loan closes on time and there are no mistakes along the way. They are working on your behalf every step of the way to make sure your loan closes on time with no delays.
Are there drawbacks to using a mortgage broker?
In most cases, working with the right mortgage broker will get you the best mortgage and the strongest loan terms. However, there are cases where it’s not the best decision or in your best interest.
Mortgage brokers don’t work with every mortgage lender.
If you have a specific lender (for instance, your bank where you’ve done business for a long time), they might not have a working relationship with your mortgage broker. Talk to your mortgage broker if you have a specific lender you want to use for your mortgage.
Mortgage brokers don’t always service all types of loans.
For example, some mortgage brokers don’t service government-backed mortgages, while others may not write enough jumbo loans to be competitive. If you’re looking for a specific loan (e.g., an FHA loan, USDA loan, or a Fannie Mae Homestyle loan), make sure your mortgage broker is qualified and licensed. In short, find out early if there are any limitations to the types of loans you can qualify if you decide to use that mortgage broker.
There could be a conflict of interest.
If the mortgage broker always uses the same lender or only uses lenders who pay the highest fees, that broker may not be competing hard enough to get you the best mortgage.
Top 3 Things to Consider Before You Use a Mortgage Broker
If you’re deciding whether or not to use a mortgage broker, there are a few questions to ask. Working with a mortgage broker is an important relationship that will impact your mortgage and your finances. Just like a realtor or a mortgage lender, a mortgage broker has a big impact on the final terms of your mortgage.
1. Find out how they get paid.
Typically, a mortgage lender pays the mortgage broker directly once the loan is written. Since a mortgage broker is able to secure the loan at wholesale pricing, the payment they receive from the lender is usually not passed on to the borrower. Other times, you’ll see broker fees listed at closing or on the loan estimate. Check with your mortgage broker and find out how they get paid.
2. Ask which mortgage lenders they work with and where they are licensed.
Mortgage brokers partner with specific lenders and are licensed in certain states. What’s more, mortgage brokers service certain types of loans. For example, if you’re relocating from California to Washington and looking for a VA loan, then it’s important to confirm that your mortgage broker is licensed in those states and also services VA loans. Depending on the type of loan you want or where you’re buying the property will help you decide to use a mortgage broker.
3. Seek out references and client reviews.
Best case scenario, a friend or colleague recommends a great mortgage broker with a solid history of happy clients. If you’re moving to a new area or searching on your own, seek out reviews and client satisfaction rates.
What’s Next
Your mortgage is a big deal and one of the biggest financial decisions many people will ever make. We work with multiple lenders across California, Oregon, Washington and Colorado to secure competitive quotes and make sure our clients get the best mortgage. Our goal is to save you money and help you reach financial freedom. Give us a call to get started.
