Clients need to understand their employment history is a piece of the mortgage application puzzle.
The Top Three Advantages of Working with a Mortgage Broker
Buying a home is likely the largest purchase borrowers will ever make. That means they’ll want to have the right people by their side. While there are many other key players in the homebuying process, obtaining a mortgage loan is the single most important part of establishing a budget and their monthly payment expectations. After all, most homeowners can’t set their sights on their version of a dream home without first securing a home loan.
Finding the right home finance professional doesn’t have to cause added stress, though! Borrowers can start with one simple question: Should I work with a mortgage broker or a mortgage lender or banker? If you’re looking for a high-level overview to share with potential customers, we’ve broken down the key differences between mortgage brokers and retail loan officers below.
What is a Mortgage Broker?
So, what exactly is a mortgage broker? Mortgage brokers are home finance professionals who essentially shop around for their clients. In other words, they act as an intermediary between the borrower and the lender (the financial institution or mortgage bank).
Unlike a representative of a bank or credit union, they do not use their own institution’s funds to originate a mortgage loan. Instead, they connect with and get to know their clients, evaluate any relevant programs on the market, and can make recommendations that best fit the buyer’s situation and criteria kind of like a personal mortgage shopper.
What is a Retail Lender/Bank?
Retail loan officers are another option for financing a home purchase. These professionals are employees and representatives of a bank or mortgage lender. They work to connect borrowers with their bank’s/lender’s mortgage programs, which are then funded by the bank or mortgage lender.
Because they work in a banking environment, retail loan officers cannot offer any loan types or terms from other institutions. They can only provide share offerings of their employer.
Mortgage Broker Versus Retail Lender/Bank
So, which home finance professional is the right fit for a borrower? The answer will depend entirely on their goals, preferences, and financial situation.
Benefits of Using a Mortgage Broker
Besides who they work for, what are the advantages of working with a mortgage broker?
#1 – Speed
A broker doesn’t work at the bank’s speed. They don’t work “banker hours” or turn off the lights at 5:00 PM on the dot. A mortgage broker is a person, not a retail lender. They understand and appreciate the urgency of homebuyers because they’ve most likely been there.
On top of that, they have a sense of urgency because they’re working directly with a borrower. Working with a banker/lender, on the other hand, can be a slow process because the corporate structure gets in the way.
#2 – More options
With a banker/lender, borrowers are limited to what the bank/lender has to offer. Interest rates, dates the funds can be available, and anything else needed is in the hands of the bank/lender. When working with a banker/lender, the bank/lender has the upper hand.
When working with a mortgage broker, borrowers have the advantage. How? Because a broker shops around. They look for the best deal rather than simply placing a borrower’s needs on the desk of a single bank executive and taking what they offer. Plus, mortgage brokers may be better able to serve borrowers with unique financial situations like a self-employed borrower in need of a bank statement loan or a borrower seeking a Jumbo loan with a lower down payment option.
Want a lower interest rate and a lower monthly payment? Working with a mortgage broker to shop for rates and sift through unique home loan financing solutions will may be the best option.
#3 – Reduced Costs
Because they have access to a wider range of loans and lenders, mortgage brokers can have a greater chance of saving borrowers time and money. This cost-saving benefit of working with an independent mortgage broker is especially true for economically and socially disadvantaged households.
In fact, borrowers have the potential to save thousands of dollars by working with a mortgage broker. On average, all borrowers working with a mortgage broker saved 2.56% on home loans in 2021 while all low-income borrowers saving 2.94%.
Which is a Better Fit?
While there is no universal right answer to this question, most homebuyers could benefit from the flexibility of working with a mortgage broker. After all, it never hurts to have options!
If a borrower is still on the fence, they should consider speaking with both a mortgage broker and a retail loan officer before making a final decision. A buyers’ homebuying team will be key in securing their dream home, so it’s important to make the right hires.
