Some Lenders Do Not Work With Mortgage Brokers
This is an increasing trend since 2008, as some lenders are finding that broker-originated mortgages were more likely to go into default than those sourced through direct lending. By working through a broker, you may not have access to these lenders, some of whom may be able to offer you better mortgage terms than you can get through the broker.
It’s About More Than Just Borrowing Money To Buy A Home
Youll find plenty of places to get a mortgage loan when youre ready to finance your home purchase. Two of the most common options are dedicated non-bank mortgage lenders, such as Quicken Loans and SoFi, and large banking institutions, like JPMorgan Chase and Wells Fargo. Each offers something the others don’t, so your choice could depend on your priorities.
Cheaper Home Loan Rates Than Going To The Bank Directly
Mortgage brokers have a more direct relationship with the banks than members of the general public do. In some cases, they may have been former mortgage bankers themselves, with many years in the industry.
Due to this direct relationship, mortgage brokers can obtain better home loan rates than would be available to the public.
Also, a mortgage broker is at times able to request for preferential rates which are not publicly advertised by banks in Singapore due to the volume of business they may have already generated for the bank.
After all, in Singapore, there can be as many as 50+ home loan packages available at any point in time. Out of all these, only a handfuloften two or three bankswill offer the lowest preferential interest rates.
Keep in mind that banks often take turns in offering the most attractive interest rates on a monthly or quarterly basis to gain market share. Therefore, knowing when such exclusive rates are offered and by which banks is where a mortgage broker truly adds value.
If you were to go the banks directly, trying to find the best home loan for your needs can be extremely time consuming and confusing due to the various interest rates and packages available to choose from.
Mortgage brokers can therefore make mortgage shopping easy, fast, and convenient.
If you still prefer to do the legwork on your own, it would be a good idea to refer to a guide for mortgage home loans in Singapore for reference.
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Mortgage Brokers: An Overview
When shopping for a mortgage, many home buyers enlist the services of a mortgage broker to find them the best terms and rates. In the wake of the real estate market crash in 2008, however, the business practices of brokers came under scrutiny, and the question of whether they act in customers’ best interests was raised.
Working with an experienced, competent mortgage broker can help you find the right mortgage. All the same, there are both advantages and disadvantages to consider before committing to one.
Cons Of Using A Mortgage Broker
Katat, a past commenter on this article, said this about their experience:
âNot really âconsâ in using a brokerComparing the rates, brokers have always found a better discounted rate for my mortgages. If a main bank is chosen from the best options the broker offers, you can also get access to special offers the bank offers .â
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The Disadvantages Of A Bank
A 2016 report from one of Australias major bank found that the most common reason that people approached a bank instead of going to a mortgage broker was because they already had accounts with them.
So convenience is the most common reason why people go to a bank directly but it doesnt necessarily ensure that youll get a smooth loan application process.
Banks are large companies and communication between departments is a big problem.
Mortgage Brokers Vs Banks
30 October 2019
If you’re thinking of applying for a home loan, there are a couple of ways you can go about it. You might directly approach a bankeither your own or one you’ve not dealt with beforeor you can go through a mortgage broker. Both options will help you get closer to your lending goals, and both have benefits to be aware of.
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Recent Changes With Mortgage Regulations And The Interest Rate Environment Are Leading To More Canadians Going To Brokers Instead Of Banks For Home Loans
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 If There Is A Problem With My Mortgage Broker
If you have a concern about the service provided, you should contact the brokerage that employs the mortgage broker. If you are still unable to resolve the issue, you can file a formal complaint with the provincial regulatory body. In Ontario, this is the Financial Services Regulatory Authority.
The Mortgage Brokers Regulators Council of Canada has recently published a code of conduct, which brokers must follow.
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Helping To Find A Reliable Conveyancing Law Firm
A law firm is engaged in any property transaction. The lawyers job is to check through the various deeds and documents, from the Sale & Purchase Agreement to the background of the seller .
A mortgage broker can help you find a reputable conveyancing law firm at a fair price . They have first-hand experience in dealing with the various firms, and will know which ones are reliable.
Note that a shoddy law firm can cause financially significant delays if they make errors on your mortgage paperwork.
Brokers Often Do Not Guarantee Estimates
When a mortgage broker first presents you with offers from lenders, they often use the term “good faith estimate.” This means that the broker believes that the offer will embody the final terms of the deal, but this is not always the case. In some cases, the lender may change the terms based on your actual application, and you may end up paying a higher rate or additional fees.
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Mortgage Broker Vs Bank
In general, if your loan is a straightforward transaction, and your credit, income, and assets are strong, you may be able to save time and money with a bank.
If your application involves challenges, a broker who knows which lenders are most flexible can help.
For instance, a broker might be best if your FICO score is 580 and you have a sparse credit report, because youd be right on the borderline of qualifying for an FHA loan.
A good broker would know which lenders are lenient on credit and more likely to approve your application.
That said, many brokers today offer competitive pricing in line with that of direct lenders. And many banks today have a larger variety of programs. Look for portfolio lenders if you need something really creative.
To get the best of both worlds, obtain loan quotes from at least one broker and at least one bank when you shop for a mortgage.
Pros And Cons Of Using A Traditional Bank
| Pros | |
|---|---|
| May have a pre-existing personal relationship with a bank | Motivated to sell clients a specific mortgage product rather than get them the best rate |
| Some people like having a brick-and-mortar building to go to whenever they have questions about their mortgage | Rates are not as competitive as alternative banks that a broker may have access to |
| As your regular financial service provider, they may take more time to explain the fine details of a mortgage, like how to port a mortgage, penalty clauses, limits on lump sum payments and more | Often refuse people with rocky financial history |
| A bank can offer you a variety of financial services like HELOCs |
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Mortgage Brokers Vs Banks: Which Should You Choose
When shopping for a mortgage in the past, the default option was to go to your local bank branch, but now times have changed. Mortgage brokers have been rising in popularity for years and even more so during the COVID-19 pandemic.
If youre looking to get a mortgage but youre new to the world of mortgage brokers, then you probably have some questions. Here, well look at the difference between working with a bank and a mortgage broker, their pros and cons, and when to use one over the other.
In This Article:
Broker Vs Bank Checklist
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Both offer free advice so the fit will come down to personality and ability.
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Be Upfront
Explain that you are seeking quotes from different sources to find the best deal for you.
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Clarify Fees
Loan Fees there may be an administration fee which should be clearly explained to you from the outset.
Advice Fees brokers usually operate from a commission arrangement but it does not hurt to clarify all potential charges at the beginning.
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Build Trust
If you dont feel the person is looking after your needs then try someone else until you find the fit that is right for you.
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How Brokers Get Paid
Professionals are fairly compensated for arranging mortgage financing on your behalf. In most cases, their fee is paid by the lender.*
In order to attract your business, lending institutions must allocate a portion of their income to marketing and sales, but representatives working for these institutions have only one financial product to sell their own. Lenders know you wont do business with them unless you have had ample opportunity to shop and compare. Therefore, it is in their best interest to compensate mortgage brokers for helping you do exactly that.
*Situations exist where specific clients or properties do not meet conventional lender expectations. In these cases, a mortgage broker may attempt to find suitable financing through alternate sources. A fee, agreed upon in advance, may be charged directly to the client by a mortgage broker.
What Are The Pros Of Working With A Direct Lender
Direct lenders can make funding decisions quickly since they control their own lending criteria. This allows them greater control over which customers get the funds that theyre seeking. Another advantage is that many large direct mortgage lenders are licensed nationwide, which means that they can help buyers from any state. When a borrower is looking to buy a home in another state, direct lenders can be a great source of help.
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Why Use A Mortgage Broker Instead Of A Bank
When you need a mortgage loan, the first thing to do is contact your bank or credit union.
right?
After all, your bank knows you, has most of your information, and it will always provide you with the lowest mortgage rate.
Unfortunately, that is not always the case.
That is why you need to consult with a mortgage broker who can research the entire mortgage market to find you the right mortgage.
Before going deep into why use a mortgage broker instead of your bank, it is essential to understand who a mortgage broker is and why you should consider using one.
A Broker’s Interests May Not Align With Your Own
Your ultimate goal in shopping for a mortgage is to find one with an affordable interest rate and low fees. You are in it for the long haul. A mortgage broker, on the other hand, often gets a fee from the lender for bringing in the business. This fee can be based on the amount of the mortgage and will vary among lenders. A broker’s goal, therefore, is to get you into a mortgage that maximizes their compensation. The 2008 market crash revealed that many brokers were getting their clients into mortgages that they could not afford over time.
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What Is A Mortgage Broker
Mortgage brokers are licensed professionals who have dedicated their lives to offering mortgage financing services to potential homebuyers. Brokers serve as your representative when you are in search of a mortgage lender. A broker will also assess your situation to help establish the top rate and product to best suit your needs.
Since brokers are independent of any lender, they can provide you with qualified advice that has your best interests in mind and not the interests of your bank. Mortgage brokers are also privy to exclusive mortgage rates that may not be accessible on the retail market.
Working with a local broker offers additional benefits as well. You can meet your broker in-person to discuss your needs, and they will have a familiarity with the local housing market. This information can help you get closer to the home of your dreams in an area you prefer.
Comparing Banks Versus Mortgage Brokers
In addition to the points in the comparison chart above, there are other factors to consider when deciding between a bank and mortgage broker. Banks, for instance, can offer some discounting for consolidating your services with them. The value of this will vary from person to person.
Another key benefit of using a mortgage brokers is that they have access to, and knowledge of, the entire mortgage market. They can advise which lenders will consider your case and which will not based on your individual circumstances. This is particularly useful for people with poor credit ratings. Mortgage brokers have access to lenders who specialize in servicing people with adverse credit, and can leverage relationships with mainstream banks.
Mortgage brokers can also access exclusive deals not available on the open market, or negotiate a better interest rate or lower application fees from the lender in some cases.
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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.
What Are The Cons Of Working With A Direct Lender
For one, you must apply individually with each lender. When dealing with direct lenders, there are no brokers to assist in the tasks of gathering documents and assessing your financial status.
Another drawback is the approval of your application. Direct lenders have their own underwriting and loan terms. If there are problems with your application that they cannot overcome, then your loan application could be denied. If this happens, youll have to start a new application with a new lender.
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How A Mortgage Broker Works
A mortgage broker works with everyone involved in the lending process from the real estate agent to the underwriter and closing agent to make sure a borrower gets the best loan and the loan closes on time.
A broker can work independently or with a brokerage firm. Mortgage brokers research loan options and negotiate with lenders on behalf of their clients. A broker can also pull the buyers credit reports, verify their income and expenses and coordinate all of the loan paperwork.
Many brokers have access to a powerful loan-pricing system, as well, which prices a mortgage loan across many lenders at one time, thereby speeding up and streamlining the process.
