A mortgage broker acts as an intermediary who brings mortgage borrowers and mortgage lenders together. He does not use their own funds to originate mortgages. Many people like to use a mortgage broker when looking for a new mortgage.
Working with an experienced, competent mortgage broker can help home buyers to find the right mortgage deal at low-interest rate. Advantages of Mortgage brokers include:
PROS:
1. Brokers may have more connections: Some lenders work exclusively with mortgage brokers. They rely on them to be the gatekeepers to bring them, suitable clients. This saves lenders time which might be wasted to search for more customers due to a few links with customers.
2. Saves one legwork: Mortgage brokers have regular contact with a wide variety of lenders. This is a great advantage to a business that relies on different categories of services offered by lenders.
3. You may save some fees: Several types of fees can be involved in taking on a new mortgage. In some cases, mortgage brokers may be able to get lenders to waive some or all of these fees. This can save you hundreds to thousands of dollars.
4. Expert advice: Some of the mortgage brokers are licensed professionals and have gone extensive training. This qualifies them to offer best advisory service to their clients. For example, they help to get the best lender and mortgage product specifically designed for one’s need.
5. Independent: They work for their specific clients but not the lenders. Therefore, they work only on available mortgage products that match their clients need.
6. They represent their clients: They act as financial experts on behalf of their clients. They’re able to give a clear and positive impression on the existing business.
7. They save you time: Mortgage broker will help one to save time and do all the legwork when it comes to paperwork and negotiating with a lender.
8. They offer lower interest rates: Mortgage brokers have a good relationship with a large number of different types of lenders and are able to negotiate lower interest rates.
9. They let you secure a mortgage with bad credit: Mortgage brokers can help those turned down by traditional lenders in securing loans. Brokers mostly work with hundreds of different lenders and specialized institution. Some brokers specialize in helping those with bruised credit to get a mortgage.
10. Sometimes there is no need to pay a mortgage broker: In most cases, you don’t need to pay for their services because they can receive a fee from the financial institutions that arrange for your mortgage.
CONS:
1. One has to pay brokers fee: Mortgage brokers generally work on commission. The commission is charged on a percentage of the mortgage amount you are financing. This can be the biggest advantage, to business with low working capital and don’t know how to find the best deal.
2. Inexperience: In many cases, the best and most experienced loan officers from the banking world move to a career as mortgage brokers. In many cases, inexperienced brokers have little knowledge about the market.
3. Not looking out for you: Mortgage brokers may not necessarily always be looking for the best deal for you. Instead, they might be looking for the best deal for themselves. A mortgage broker might be trying to steer you towards some loan programs that pay the highest commission to him. These mortgage programs may or may not be that best deal that he can find.
4. Little advantage: working with a mortgage broker in today’s market may not actually provide you with that much benefit. In the past, people used mortgage brokers as a way to access lending programs that they could not find on their own.
5. Lender’s fee: You may find a better rate through a mortgage broker than what the bank will offer you. Broker’s closing cost might be higher than when working directly with the bank. In some cases, you can end up paying more than what you would have paid by going through a bank, once the loan rate and the fees are factored together.
6. Change in technology: With today’s technology, you can simply use a search engine to find hundreds of lenders to work with. As a result of this revolution, mortgage brokers are not necessarily needed.
7. Commissions: When the mortgage lender pays the broker a commission, a good deal for your broker can represent a poor deal for you. If the mortgage broker chooses a lender based on her own commission rather than your financial interest, you won’t get the best available rates.
8. Brokers’ interest might not match yours: A mortgage broker will often get paid a fee for bringing the lender the business. The fees are based on the amount of the mortgage. Therefore, the broker’s goal may be to get the right mortgage that gets them the most compensation.
9. Brokers often do not guarantee estimates: Broker’ often use the term good faith estimate when presenting you with the lender’s offer. The lender might change the terms based on application and hence one can pay extra fees.
10. Lacks relationship status: When the borrower has an existing relationship with the bank, working through a broker instead of applying directly can be a disadvantage.
