For consumers interested in obtaining a home mortgage, there are countless different sources to finance that loan. You can utilize a mortgage broker; borrow directly from a mortgage company; a banker; or even your home builder. With all the options, it is easy to get confused by who does what, and what mortgage services they offer.
Mortgage brokers usually do not fund loans themselves, but rather serve as middlemen between the homebuyer and the mortgage company, handling the mortgage financing for the borrower. They earn their fees directly as a percentage from the mortgage originator and some from the borrower, or as a combination of both. Mortgage brokers have access to several different lenders, so they are usually aware of the latest rates, fees and lending practices. Mortgage brokers also offer:
- Options. With access to a variety of different mortgages and lenders, brokers are able to pass that variety to their clients, giving them the most choice in rates and mortgage options.
- Rates. Mortgage brokers can save you money by shopping for the best rates for you, as well as helping you find another lender if your initial application is turned down. Mortgage brokers usually can offer lower rates since lenders compete for their business.
- Objectivity. Since a mortgage broker basically works for you, they are objective enough to give you the best advice possible. You are their focus and they work to find the best mortgage fit for you.
- Expert advice. Most mortgage lenders specialize in only mortgages. This gives them an advantage over a bank or credit union since they focus on only one area of the financial industry. Plus, they know more about lenders who are willing to lend to different types of borrowers, those with bad credit, or for commercial purchases, or a variety of other scenarios.The representatives at a bank, credit union or other lending institution are employees of that company and their job is to sell and process mortgages and other loans. In this case, the bank or credit union is considered the mortgage originator and their product is the only one they will present. This does not mean they are limited in the types of loans they offer, but rather all the mortgages originate from one institution.
The loan representative will review your application and then work with you to find a loan to suit your needs. Once you are approved, the loan officer moves forward to process the loan.
So what is the difference? If you are looking to buy in another part of the country, a mortgage broker is likely to be able to help you find the best loans for that area, since interest rates and other factors can vary in different regions. Mortgage bankers may not always have a local office in a different part of the country.
If you have less than perfect credit, a mortgage broker can often find mortgage companies willing to lend to you, as they have access to a wider variety of lenders, and it may be easier to find a loan for a commercial or other unique property by using a mortgage broker.
No matter which lender you choose to work with, you should go with the one who will offer you the best terms. Shop around with both different mortgage brokers, as well as mortgage bankers to see which will offer you a better loan. Ask each one the same questions to determine who will be the easiest to work with, both in securing the right loan, and after closing, should a problem arise.