Friday, December 2, 2022

Is It Better To Go Through A Mortgage Broker

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Mortgage Broker Or Lender Which Is Better For You

10 Questions You Should Ask Your Mortgage Broker (Ep268)

Youre ready to apply for a mortgage loan and begin the hunt for your dream home. Now you have to decide between the two main providers of mortgage financing: mortgage brokers or mortgage lenders, the latter including both banks and other direct lenders.

The big difference between the two? Mortgage banks and non-bank direct lenders rely on their own money to fund their mortgages. When you apply for a mortgage loan at one of these lenders, you’ll work with that company’s employees, everyone from the loan officer who takes your application to the underwriters who verify that you can afford a monthly mortgage payment.

Mortgage brokers act a bit like insurance brokers. They don’t work with one company. Instead, they work with a wide range of wholesale lenders. This means they can offer you a greater number of loan products.

Whether you should work with a direct mortgage lender or a broker depends on your individual finances. But in general, if you have a solid credit score without any missed or late payments on your credit reports, you can expect to pay lower fees when working with a mortgage lender directly. If your credit is less-than-perfect, though, and you might need a bad-credit mortgage, a broker might be able to find a loan with a lower mortgage rate. And if youre struggling to qualify with a mortgage banker or non-bank lender, a broker, who works with several lenders, might be able to find an originator that will approve you.

Banks And Credit Union Loan Officers

The simplest way to apply for a mortgage is to walk into your local bank or credit union and sit down with a loan officer. He or she will take your application and, hopefully, present a number of different loan options for your situation. Depending on the bank, you may get a really good deal, especially if youre already a loyal customer.

Small local banks and credit unions often offer the best mortgage rates. Trouble is, many of them only lend to people with truly immaculate credit. This alone can rule-out many first-time buyers who simply dont have long enough credit histories yet.

But lets assume your bank offers you a loan. Unless the rate the bank offers is lower than national averages, how do you know its the best deal? Unfortunately, you dont. So you head down the street to get a quote at another bank or you go to a mortgage broker.

How Mortgage Brokers Get Paid

Often, lenders pay the broker a fee or commission for selling their products, so you don’t pay the broker anything.

Some brokers get paid a standard fee regardless of what loan they recommend. Other brokers get a higher fee for offering certain loans.

Sometimes, a broker will charge you a fee directly instead of, or as well as, the lender’s commission.

If you’re not sure whether you’re getting a good deal, ask around or look online to see what other brokers charge.

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Good Credit A Direct Lender Might Be Better

Brian Ma, broker with Flushing Real Estate Group in Flushing, New York, said that he advises his clients with solid credit to seek out mortgage lenders. Closing a mortgage with one of these companies is often an easier process, he said.

“Banks, generally speaking, know their products inside and out, and closing loans with a bank is almost always more expeditious with less of a hassle,” Ma said.

But Ma does recommend mortgage brokers for certain clients. Clients with late or missed payments on their credit reports might benefit from working with a broker, he said. Those who can’t document all of their income might also do better working with a broker, Ma said. That broker can share your information with a greater number of lenders, including those who might not balk at working with borrowers with financial blemishes.

“The ability to shop a potential loan to various banks and not just one bank is what makes a mortgage broker such a valuable resource for Realtors,” Ma said. “A mortgage broker is great for matching the facts on hand with a variety of loan programs.”

Do Mortgage Advisors Get Better Rates For Customers

How To Find The Best Mortgage Lenders

Yes, they can potentially get you more favourable interest rates than the ones youd end up with if you went directly to a mortgage lender. This is because going straight to a lender without seeking professional advice first means you would only have access to their products only and risk missing out on a more suitable deal available elsewhere.

This is the main reason why youre more likely to end up with a favourable interest rate if you apply through one of the advisors we work with. They have whole-of-market access so all of the best deals that you qualify for will be within reach if you decide to work with them.

Moreover, some mortgage advisors can negotiate a more favourable deal than you would otherwise get with a specific lender and may have access to broker-exclusive deals.

Remember, too, that there are some lenders out there that do not deal with the public directly and promote their products exclusively through brokers.

If you fall into a category that mortgage providers consider higher risk such as bad credit, a self-employed mortgage, expat, retired or youre looking for a mortgage with low income, a specialist broker can make all the difference in getting a mortgage with bad credit.

Many mortgage lenders either charge higher interest rates to customers in these categories or turn them away altogether, but a broker with the right expertise can match you with the provider who is best positioned to lend on the most favourable terms.

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Popularity Of Banks Versus Mortgage Brokers

According to a 2019 CMHC survey, mortgage brokers represented 47% of total mortgage originations in 2019, up from 40% in 2009 and 26% in 2003. This is after shopping around, as most buyers contacted up to 3 lenders and 2 mortgage brokers for information or advice.2

So, the increased number of quotes acquired reflects prospective home buyers’ inclination to compare rates, a role essentially taken on by a mortgage broker.

Key Considerations When Working With A Direct Lender

The mortgage process can be complex and confusing, so being able to communicate directly with your loan officer to ask questions or make requests can be comforting. Without a middleman, you can skip broker fees and you wont second guess whether your brokers commission goals impacted their lender recommendations, points out Tayne.

If in your research you find that your current bank or credit union offers the best mortgage rates, find out if you can save more by funding your mortgage through them. Many lenders offer perks or rate discounts when you open more than one account with them.

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You May Owe A Broker Fee

Mortgage brokers are paid either by the lender or by you. If the fee is covered by the lender, you need to be concerned whether you might be steered to a more expensive loan because the commission to the broker is more lucrative. If you pay the fee, figure it into the mortgage costs before deciding how good a deal you are getting. And be sure to settle all fee issues upfront before you sign anything or start working with a broker.

Spend some time contacting lenders directly to obtain an understanding of which mortgages may be available to you.

Why Are Credit Unions Bad

Should You Get A Mortgage From A Bank Or A Mortgage Broker?

The downsides of credit unions are that your accounts could be cross-collateralized as described above. Also, as a general rule credit unions have fewer branches and ATMs than banks. However, some credit unions have offset this weakness by joining networks of surcharge-free ATMs. Some credit unions are not insured.

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The Advantages Of Using A Mortgage Broker

They will collect your income evidence and the other documents you need to provide as part of your application and take care of the whole process from application to settlement.

This includes:

  • Communicating with credit officers to provide further evidence they may need to assess your application.
  • Liaising with valuers, your solicitor, your builder and even real estate agents to ensure a smooth application process.
  • Being your one point of contact across the entire process and staying in contact at each stage of the process so you know what is going on.

Where great performing bank staff work together with mortgage brokers is when you as a borrower get the best of both worlds.

The funny thing is that these staff members tend to be promoted to management roles away from clients or they become incredible mortgage brokers themselves!

Discover the broker difference by calling 1300 889 743 or by completing our today.

Is A Mortgage Broker Right For Me

You can save time by using a mortgage broker it can take hours to apply for preapproval with different lenders, then there’s the back-and-forth communication involved in underwriting the loan and ensuring the transaction stays on track. A mortgage broker can save you the hassle of managing that process.

But when choosing any lender whether through a broker or directly you’ll want to pay attention to lender fees. Specifically, ask what fees will appear on Page 2 of your Loan Estimate form in the Loan Costs section under “A: Origination Charges.”

Then, take the Loan Estimate you receive from each lender, place them side by side and compare your interest rate and all of the fees and closing costs.

That head-to-head comparison among different options is the best way to make the right choice in one of the largest purchases in your life.

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The Cost Of Using A Mortgage Broker

In return for doing all that, the broker charges a fee, which is usually a percentage of the loan amount. The buyer or the lender can pay this.

If the broker expects the buyer to pay, they might offer what’s called a lender credit, which essentially builds the fee into the loan.

That way, you pay nothing out of pocket.

All of that sounded great to me when I was ready to buy again.

I was working on growing my freelancing business and raising two kids and I just didn’t have time to get bogged down in the details of finding a mortgage.

So I chose to go with a broker. But things didn’t go as smoothly as I’d planned.

How Much Does A Mortgage Broker Cost

Why You Should Go Through a Home Mortgage Company

A mortgage broker may be compensated through a combination of fees paid from borrowers and commissions that are paid out by the lending institutions who want them to originate loans. The costs vary greatly but a mortgage broker generally earns between 1% and 3% of the total loan amount. The total amount paid by the borrower will vary based on the type of loan, what broker is used, and how much the broker is earning in commissions from the lending institution.

A mortgage brokers pay could show up on your closing costs sheet in a variety of ways. They may charge loan origination fees, upfront fees, loan administration fees, a yield-spread premium, or just a broker commission. When working with a mortgage broker, you should clarify what their fee structure is early on in the process so there are no surprises on closing day.

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The Bottom Line: Do I Need A Mortgage Broker

Working with a mortgage broker can save the borrower time and effort during the application process, and potentially a lot of money over the life of the loan. In addition, some lenders work exclusively with mortgage brokers, meaning that borrowers would have access to loans that would otherwise not be available to them. Brokers can get lenders to waive application, appraisal, origination, and other fees.

It’s critical to examine all the fees, both those you might have to pay the broker, as well as any fees the broker can help you avoid, when weighing the decision to work with a mortgage broker.

A Broker May Not Source The Best Deal For You

Many home buyers simply assume that a broker can deliver a better deal than they could get on their own, but this is not always the case. Some lenders may offer home buyers the very same terms and rates that they offer mortgage brokers . It never hurts to shop around on your own to see if your broker is really offering you a great deal. As mentioned earlier, using a mortgage calculator is an easy way to fact check if your broker is offering you a good deal.

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Mortgage Brokers Vs Banks: The Pros And Cons

Tracy Hanestimer

If youre looking for a mortgage on a home purchase or to renew one on a home you already own is a mortgage broker or a bank your best option?

The main difference is a bank mortgage officer represents only the products their institution offers, while a mortgage broker is an intermediary who works with multiple lenders and is paid a referral fee by the lenders. Mortgage brokers are regulated in Ontario by the Financial Services Commission and require a licence.

While traditional banks still are used for mortgages by the majority of homeowners, use of brokers is trending upward, notes Monica Guido, manager of client relations with Canada Mortgage and Housing Corp. Its higher among first-time buyers. Finding a deal, or the desire to get the best rate, is the key reason people use a broker.

Because mortgage brokers work with many lenders, including major banks, small lenders, insurance and trust companies, and private funds, they often have access to a better rate.

In 2017, 39 per cent of homeowners used a broker to arrange their mortgage, up from 33 per cent in 2016, according to CMHC. On average, consumers consult with 4.5 mortgage professionals when seeking a home loan, including 2.4 lenders and 2.1 mortgage brokers.

Some of the advantages for both banks and brokers:

Banks

  • Customer may already have a relationship with a bank and its staff.

Mortgage brokers

  • Often are able to get better rates than offered by major banks.

What Will A Broker Cost You

Mortgage Broker vs Bank [Who can you trust?!]

Some, and the best-known of these is probably London & Country, dont charge a borrower anything, but instead take commission from the lenders, typically between 0.35% and 0.4% of the loan.

The majority of brokers, however, charge a fee and that can be either a flat fee or a percentage fee. Its worth noting that these brokers will also receive a commission from most lenders.

Consumer group Which?, for example, charges an upfront non-refundable fee of £249 and a second fee of £250 once you complete your mortgage . Other big names such as John Charcol and the Mortgage Advice Bureau charge a percentage fee, which can vary depending on your circumstances. However, this fee must be agreed with you upfront, so there shouldnt be any hidden surprises.

John Charcol, for example, has a minimum fee of £495 and a maximum of 1.5% of the loan value. However, its typical fee is 0.24% of the loan value.

Regardless of fee, a good broker should consider not only the best priced loan for you but which lenders are more likely to underwrite your loan and which ones to avoid such as those with a backlog of applications.

We know the little variations in criteria that mean that one lender, for example, will take school fees into their affordability assessment, while another wont, says Andrew Montlake of brokers Coreco.

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What Are The Different Kinds Of Mortgage Broker

If you are planning to employ the services of a broker, do your homework first: ask friends and family for a recommendation, check the internet for reviews, and suss out their fee structure.

Ask them outright how many lenders they work with the more lenders, the more options you have at your disposal and the more likely you could be to get a good deal.

Generally, there are three types of broker

  • Tied brokers: These are usually recommended to you by a particular mortgage lender and offer deals only from that one mortgage provider.

  • Multi-tied brokers: These offer a range of mortgages from a panel of mortgage lenders.

  • Independent brokers: Also known as whole-of-market brokers, these scan the entire mortgage market to find the best product for you. However, whole of market can be a little misleading. Some lenders, such as First Direct, do not work with brokers and offer mortgages to borrowers only directly.

Mortgage brokers have to tell you from the outset exactly what range of mortgages they can offer. For the most wide-ranging advice and products, it is always advisable to choose an independent broker that offers a whole-of-market service .

Should You Use A Mortgage Broker Or A Bank Loan Officer

David Weliver|

Modified date: Aug. 28, 2020

Shopping for a mortgage can be intimidating. There are thousands of mortgage lenders and hundreds of ways lenders can tweak home loans to distort their real costs. Youre also facing the excitement of buying a new home and you may feel vulnerable as lenders nit-pick your credit report. Its understandable that many home buyers get stuck with bad mortgages because they just wanted to get the process over with. Unfortunately, thats no small mistake: On a 30-year mortgage, fractions of a rate point can add up to tens of thousands of dollars.

Want to avoid a similar fate? Its all about knowing how to shop for a mortgage.

Whats Ahead:

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