When buying a home, two main options exist: Working with either a bank or mortgage broker. Which route you take will depend on several factors such as how much money you want to save, the type of loan required and your individual preferences.
A Mortgage Broker Vs a Bank
While many borrowers opt to work with a mortgage broker, this doesn’t guarantee they’ll get the best rate or terms. Before making your decision about whether or not to work with a broker, it is important to take into account how various lenders charge interest rates and terms.
Brokers typically receive commissions from lenders they refer you to. These fees can range anywhere from 1%-2% of your loan’s total cost and can either be paid in one lump sum at closing or added onto your loan amount.
For first-time homeowners, a broker can guide you through the process of getting approved for a mortgage and comparing offers from lenders. These agents possess extensive institutional knowledge about the industry as well as an in-depth comprehension of today’s mortgage options available to borrowers.
They can offer professional advice based on their extensive research. They know which lenders offer loans for various situations, such as those that might be difficult to get if you have poor credit or recently declared bankruptcy.
They provide a more convenient alternative than searching for a home loan on your own. Mortgage brokers usually present multiple offers from lenders and take care of all the details, like collecting documents and sending them directly to an underwriter.
Furthermore, mortgage brokers offer mortgages tailored to fit your individual needs. For instance, a broker may assist you in securing a special type of loan if you’re self-employed or purchasing in an unusual area.
These agents can also be invaluable in avoiding expensive fees that weren’t previously disclosed in your loan agreement. Furthermore, they save time by guiding you through the process and ascertaining whether a lender is reliable.
A Mortgage Broker Is a Third Party
Mortgage brokers are independent contractors, not employed by the lenders they refer you to. That means they’re not subject to the same level of regulation and accountability as banks or credit unions.
The good news is that this has changed in recent years due to increased regulatory oversight and consumer protection laws. Furthermore, borrowers no longer need to worry about mortgage brokers trying to sell them something they don’t need or want.
A Mortgage Broker Is Committed to You
Utilizing a mortgage broker has several advantages. They are experts in the home loan market, meaning they can guide you through every step of applying for and obtaining approval, from start to finish.