Some people only have a preference based on experience and others need to research whether they want to use a broker or a lender. There are some clear differences between the two, and it is always good to be informed before buying. Before subprime loans bit the dust, it used to be a major advantage to turn to a mortgage broker. Nowadays, that may not be a great advantage.
When you use a lender to finance your home loan, you borrow money for your mortgage from the lender’s own reserves, out of the lender’s own pocket. The lender lends you his own money to pay your mortgage. When you prequalify with a lender, you receive an accurate assessment of what that lender will do for you if your financial status remains the same at the time of your home closing.
The dollar amount that the lender agrees to give you is a solid commitment. When they provide you with a prequalification letter, they base it on what they know about your current financial situation. If your current financial situation does not change by the time you close, the lender’s commitment will not change. Note that a lender can be a bank, credit union, private organization, trust company, or some other entity that has reserves to lend money for real estate purposes.
Mortgage brokers, on the other hand, work with many lenders to find you the best deal on your loan. They have no money of their own to lend. Their job is to shop around for you. Sometimes they have visibility and availability of the best rates and programs. Other times, due to government restrictions, they may not be able to offer you as good a deal as a lender. When you are pre-qualified by a mortgage broker, you may or may not qualify for that amount when the loan documents are finally presented to you.
Also, the mortgage rates they quote you may or may not change when you sign the loan. What mortgage brokers usually do is evaluate your finances and calculate in the best possible way, based on experience and knowledge, how much they think they can get a loan for you and what the mortgage rate should be. All of this is based on multiple factors, including your FICO credit score. However, you must realize that the loan amount and the interest rate are fluid. It is not typical for the interest rates quoted by a mortgage broker to decrease when you sign the final loan documents. In any case, they tend to go up.
Some things to consider are that a mortgage broker charges fees for their services; normally, a bank does not. Before you commit to a home loan from any provider, ask for all fees and get them in writing. Do your short 10-day comparisons to find the best deal available. If you’re not in a rush and a broker offers you an amazing quote on fees and interest rates, wait to see if it stays that way. If not, go to the lender who offered you the next best deal.
No Comment