In previous posts you have seen me mention a Mortgage Broker. Not many people know or understand the difference between a mortgage broker and a mortgage lender. I personally prefer a Mortgage broker simply by all of the services that they have and the benefits that you can gain from them.
This post is going to walk you through the details of what the difference between a mortgage broker and a mortgage lender. And also provide to you the pros and cons of both. If you already know what the difference between the two are, then you would probably benefit from my other posts on real estate and home buying.
Before we start here is the YouTube video for this blog incase you want to watch it.
Main Difference
Mortgage Brokers help borrowers by shopping around their credentials to multiple lenders. In doing this you will get a variety of quotes from different lenders all at the same time. Once you get your results you can then go through them and pick the best lender that’s right for you.
Direct Lenders are the actual people that provide you with the loan. You go to that lender and fill out an application for a loan, and they will either approve or deny you. But it will be on their terms whenever you get accepted for a loan. Most of the time people choose this route when they are comfortable doing business with a certain company, or they have a history with dealing with them.
Mortgage Broker
Pros:
The biggest Pro with a mortgage broker is that you have options when you come to them. They will give you the best rate and get your approval when other direct lenders will not approve you. They can also refer you to different services since they have a lot of connections in the industry.
Cons:
The fees that sometimes occur when using a mortgage broker can eat away at your cost when purchasing a home. Some mortgage brokers charge a fee to the buyer, others do the seller. The biggest tip here is to keep your eyes open for the fee that they charge when looking for a broker.
Mortgage Lender
Pros:
When you use a mortgage lender or a direct lender they understand the numbers that they are looking for. This means that you can get approved for a loan quickly and easily since everything is done in house. Most of these direct lenders are licensed and nationally renowned.
Cons:
The major con here is that in order to get approved by a lender you have to apply using their application. This can mean you are doing 5 or more applications for your loan. It can get hectic understanding all of the paperwork that is needed in order to fill out the application. Also if you are denied with your application due to a misunderstanding with paperwork, you would have to restart with a new application.
Broker or Lender
When you are deciding on which one you should choose there are a couple of things to take into consideration. First you want to do your own research. Reach out to family and friends to ask them if they have any recommendations. When they give you some, make sure you check the online reviews for those companies.
You want a lender or broker to provide you with a preapproval letter. That way you can understand the range of homes you, and your real estate agent, should be looking for. Remember the tip I gave using your pre approval number from a previous post.
Lastly, just because they are giving you the lowest interest rate does not mean they are the best lender for you. Make sure the lenders are reputable, and most importantly make sure they are reachable. If you have any questions or need to reach your lender quickly, you do not want to be waiting days on end to get into contact with someone.
Rob’s Opinion
When I was referred to my mortgage broker by my agent they asked for a couple of things right off the bat. They wanted me to show them the accounts and the amounts in each account. So I had to provide statements from my savings, checking, and investment accounts. And provide any assets that I had. They also wanted to know about any debts or loans that I had, which were none. And I had to provide income which was the offer letter for my job that I was starting in a few months.
Once they crunched those numbers they were able to give me a preapproval letter. Like before I say I recommend using a broker just because of the aspect that they can shop around and get you the best offer for you. They can also check to see if you qualify for any incentives on your loan, such as if you were a first time home buyer, or if you were buying property in a certain area. Once everything was squared away the only thing left was for them to provide my paperwork during closing.
I hope you were able to get something out of this post. And like before if you have any questions about this post please comment them down below. I try my best to answer every question I have. If this interests you then you should check out my other posts on a similar topic.
