The best part about living in a free market is the choices the consumer has. The worst part about living in a free market is the choices the consumer has. There are often too many, and people can get bogged down with their decision making. The same is true when they go to shop for a mortgage. The biggest decision is whether or not to use a mortgage broker or a mortgage lender. While there is not a perfect solution that will fit everyone’s needs, there are times when a broker will offer the better deal.
Mortgage brokers are designed to be a one stop shop for those looking for a mortgage. They can shop multiple lenders, and offer the best interest rates on the market. Because the broker is representing the client to the lender, their job is to defend the client and fight for their best interest. There are several situations where people would be best served using a broker.
Sometimes people make poor decisions in their past that haunt them for many years to come. Someone who foolishly used credit in the past, but has since turned their habits around, may not be able to get a loan with a lender because of it. A broker, on the other hand, will know which companies are willing to offer subprime loans to those with less than perfect credit.
Length of Stay
Brokers will often have higher fees than lenders. This is fine if the interest rate is lower. Most people plan to buy their homes and stay in them for many years. If this is the case, it is better to pay a little more up front, but have the ongoing payments be lower.
Often lenders will only deal with one type of mortgage, usually the 30-year or 15-year fixed rate. Most people will be best served using these products, but there are many times where something else is needed. The broker will be able to quote on multiple product lines, and show the borrower the costs between different kinds of mortgages.
Brokers will be more flexible on who to work with on the closing of the loan. The borrower can often choose their own title company, PMI carrier, and other third parties. This can help keep the closing costs to a minimum, as well as provide the buyer with a sense that they were instrumental in making the decisions.
Mortgage brokers can offer advantages in certain situations, but they do come with a price. This added person needs to get paid, and it is usually through a commission. There is nothing wrong with asking the broker how they make their money, if they are honest they will explain the process. Be careful with pushy sales, some brokers do not care about their clients, they just want their commission. As with all major purchases, shop around. Not all brokers offer equal prices and fees. When you do find one that you want to work with, be ready to negotiate the costs. There is no reason to simply pay what they say to pay.