Mortgage Broker vs. Lender: How to Choose

Once a buyer has made the decision to purchase a home, the next step is to get start seeking out mortgage lenders or mortgage brokers. They may sound similar but these are two completely different terms. A mortgage lender is a financial company that issues loans and mortgages to a buyer. A mortgage broker works with various lenders and helps a buyer find the one best suited for them. In other words, a mortgage broker is like a middle man between lenders and buyers.

Why choose a mortgage broker?

The beauty of mortgage brokers is that they have access to numerous lenders and aren’t set on just one. More lenders to choose from means more mortgage loans and rates to choose from. The broker will help buyers find the right lender and fill out the paperwork for the loan. If a buyer has poor financial and credit history, the broker may be able to guide them to lenders who are easier to work with in special situations.

Why choose a lender?

When a buyer bypasses the broker and works directly with a lender they have the advantage of working with the source. In general, cutting out the middle man (broker) will save time in terms of communication. A buyer can speak directly to the lender rather than waiting for a broker to do it. Another important advantage for choosing a lender rather than a broker, is that it may cost less. While some brokers are paid by the lender, many are paid by the buyer. A percentage of sale is the typical fee structure for broker payments.

How to Choose the Right Lender

If you do choose to pursue a lender directly, the following are good things for a buyer to research in each candidate before making a final decision.

• Customer Service
  A lender who doesn’t make time to answer questions from a buyer shows a lot about the company and how their loan process will be handled. A loan process is detailed and can take some time. Buyers will have questions and need good customer support from their lender to keep the loan process smooth and successful. A good lender should also offer ways to improve a buyer’s financial status and help plan their mortgage for the future.
• Rates
  An obvious question to ask a lender is about their mortgage options for buyers and rates offered. A buyer should be informed about all that a lender has to offer. Lenders can be called directly for rates or there are various websites like bankrate.com that have databases of multiple lenders and their rates and fees. Questions about loan process time and completion rate are also helpful in making decisions.
• Referrals
  One of the best ways to find reputable lenders is through word of mouth! Buyers should ask around to friends and family for lenders they have used in the past. Another good resource is a Realtor! They work with lenders all the time and should have some worthwhile advice!

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