A common question for anyone looking to buy their first property is whether they should use a mortgage broker. Finally, you’re ready to get into the real estate market. You’ve been saving up for years, working on your credit score, and you feel it’s time to start the home-buying process.
You’re just not sure where to turn for the funding to ensure you get the best mortgage rate and unbiased advice. You’re unsure if you should use a mortgage professional or stick with your bank.
Let’s go over when to use a mortgage broker instead of a bank, what a broker does, and how you can make the best decision about your mortgage.
What Does a Mortgage Broker Do?
You may wonder why you need a broker because you’re unsure what they do. The difference between going through a bank versus using a mortgage broker is that the bank can only represent offers from their specific institutions. On the other hand, mortgage brokers work with multiple lenders, providing more variety.
A broker will shop you around to different lenders as an intermediary to have more options when it comes to obtaining a mortgage.
So, Why Do You Need a Mortgage Broker Then?
They will collect all of your paperwork and search for the best mortgage rates, possibly by going through many different lenders so that you don’t have to do this alone.
Their job is to match you with the best lender for your unique financial situation. Your broker should also provide you with unbiased advice based on your financial situation.
How Much Does a Mortgage Broker Cost?
The good news is that the lender typically pays mortgage brokers as a referral fee, so you don’t incur any additional costs. However, it would be best to double-check that you won’t pay any fees to your mortgage broker before signing any agreements.
Is a Mortgage Broker Better Than a Bank?
You might be wondering:
- Why use a mortgage broker instead of a bank?
- Would a broker be considered a better option than your local bank?
You must remember that banking can be a personal experience to answer these. I was with my local bank from childhood until adulthood until I switched to online banking when I started writing about personal finance. I would go into the bank each week, knowing everyone at the local branch. Largely, this is because I was comfortable with my bank, and my family always trusted the bank with financial products (from credit cards to mortgages).
Eventually, we realized that a bank isn’t always the best option for all of your financial needs. Sometimes you have to make the best move for your bank account, which includes using a mortgage professional to help you shop around until you find the best rate possible. If you think you might have a difficult time getting mortgage approval, finding a broker who can work with you regardless of your credit score, affordability, and more might make the process much less overwhelming.
The biggest issue with using a bank is that they can only offer products available to them. However, when you work with a professional broker, they can introduce you to a variety of products that would theoretically help you find the lowest mortgage rate possible. This means that your mortgage professional would open you to many opportunities to find a mortgage that works for your financial situation.
What are the Pros of Using a Mortgage Broker?
- You save time. They will handle all of the applications for you, and you don’t have to worry about applying for multiple mortgages.
- Lower mortgage rates. With access to more lenders, you can use a broker to find the best rates possible. Sometimes, they receive a volume discount from specific lenders. This can potentially save you thousands of dollars throughout the term of your mortgage.
- They have access to lenders that you may not. They can negotiate with many lenders you may not have access to or time to work with.
- Unbiased advice. They will likely be fully immersed in the world of mortgages. They should be able to provide you with expert advice based on your situation.
- Protect your credit score. You won’t have to worry about your credit score since you won’t have to pull your score up every time you apply with an individual lender.
What are the Cons of Using a Mortgage Broker?
- You may not have an established relationship with a broker. Whereas your bank will be familiar with your financial history, you may already feel comfortable with this option.
- You may need more documents along with additional paperwork. Since you don’t have an established relationship with your mortgage professional, you may have to go through some extra paperwork.
- Mortgage brokers may not have access to all lenders. Some lenders don’t work with mortgage brokers.
How Do You Find a Mortgage Broker?
Let’s say that you’re strongly leaning toward using a mortgage broker. How do you go about finding a broker? First, I recommend looking for a friend who recently went through the home-buying process. They may be able to refer you to a good professional.
You want to use a broker you can trust since the entire process of obtaining a mortgage can be pretty stressful without the right advice. But remember that there can be risks to using a friend or family member. So, ensure you do your research, interview potential candidates, and find a professional with enough experience and the required certifications and education.
How Do You Decide if You Should Hire a Mortgage Broker?
Real estate is always a personal decision with no one-size-fits-all solution. However, it’s important to continually explore all options before making what could be the most significant financial commitment of your life.
We looked at why you should use a mortgage broker and what to consider before using one over your bank. There’s a strong case for why you need a mortgage professional. The main advantage is that you don’t have to commit or move forward if you begin the process with a broker but, in the end, find a better deal with your bank.
However, you have nothing to lose by contacting a broker to see what options are available to you. The goal is to find the best mortgage rate possible for your unique situation. This might mean shopping around and doing negotiations regardless of who helps you obtain your mortgage.
