3 Benefits of a Mortgage Broker vs. Mortgage Lender.

mortgage broker vs. mortgage lender

3 Benefits of a mortgage broker vs. mortgage lender

Looking for a mortgage can be hard enough, but knowing who to go to to find the best rates can be a challenge. In searching for the best mortgages, you may have encountered the titles ‘mortgage broker’ and ‘mortgage lender’. Understanding the difference between the two, and the benefits and limitations of each can help you find the funding you need for your next home.

What is the difference between a mortgage broker and a mortgage lender?

Simply put, a mortgage lender is a financial institution that is directly loaning you money, while a mortgage broker is a position that deals with multiple lenders to find the best mortgage for your situation.

When working with a mortgage broker, your financial situation will be taken into account when trying to identify the best loan for your situation. A qualified mortgage broker should evaluate everything from your income, savings, and credit history to the market where you are trying to purchase your home and the type of home you are trying to buy.

All of these factor into what type of loan you need and are qualified to receive. For those who have a bad credit history, lower assets, or slightly decreased income, a mortgage broker can help to identify special loans that circumvent traditional lending limitations. 

Mortgage lenders, on the other hand, represent a specific financial institution that provides lending services. In dealing with mortgage lenders, you will be dealing with loan officers and mortgage bankers.

Loan officers are responsible for identifying and matching potential loan recipients based on their qualifying status and the loans offered by the loan officer’s lending institution, which may include Federal loans.

Mortgage bankers are responsible for actually approving and underwriting the loan so that you are issued the loan to pay for your home. In this capacity, loan officers are somewhat like mortgage brokers, but since they are working for a specific financial institution, they are part of the mortgage lending team that includes mortgage bankers.

3 Benefits of a mortgage broker vs. mortgage lender
Mortgage broker vs. mortgage lender

Is a mortgage broker or a mortgage lender better?

Deciding to work with a mortgage broker or a mortgage lender is dependent on preference and your financial situation. If you like the bank that you typically deal with for your savings/credit accounts and any other loans or lines of credit you may have previously used, then working with a direct lender is advantageous.

That being said, if you wish to shop around to compare rates, then filling out separate applications for each mortgage lending institution can be a tedious process. If you fill out too many applications, it may negatively impact your credit score.

Working with a mortgage broker can be advantageous if you don’t have a reliable bank as a lending institution, your financial situation may not immediately qualify you for a loan or you are interested in getting a perspective on the mortgage market before making a decision.

That being said, mortgage brokers have their own costs involved, with some having hourly rates or contracts while others receive commissions. In some instances, given that mortgage brokers are often backed by specific lenders trying to issue their loans, they may encourage loans that aren’t right for your situation.

Ultimately, working with a mortgage broker requires the same amount of paperwork and research as if you were to apply through a mortgage lender, but can offer more flexibility if you want to find a rate better than what a lending agency offers. 

The best choice for your mortgage

As with any decision in life, sufficient research and knowing your home-buying objective will help you narrow down which mortgage pathway to pursue.

For those who are comfortable working with their pre-existing lending agency and who don’t feel that another lending agency, via a mortgage broker, offers any advantages, then working with a direct lender is a simpler process.

For those who are looking for a home in a competitive market, who may not immediately qualify for a loan, or who deal with multiple banks and don’t want to apply to all of them for a mortgage, a mortgage broker may offer a more comprehensive approach to obtaining a loan.

Ultimately, knowing what you want out of your home-buying experience and who you feel comfortable working with will help you decide whether to work with a mortgage broker or a mortgage lender.

Jenny Fischer

Jenny Fischer

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