More consumers than ever before are choosing to work with mortgage brokers instead of going through their local bank or an online lender.
But, are you aware of what a mortgage broker does? Do you know the advantages and / or the disadvantages of using a mortgage broker?
Mortgage brokers acquire loan money from a variety of lending sources, mark it up a little for their trouble, and then sell it to borrowers.
They are middlemen in the loan process.
Now why would you want to use a middleman if you didn’t have to? The best way for me to explain is to use an analogy.
Let’s say you want to buy a new cell phone. You begin browsing online at each of the cell phone providers.. AT&T, Verizon, Sprint, etc. comparing features and price. It can get very confusing, as well as time consuming, browsing several different sites trying to find exactly what you are looking for.
You may find it a lot easier, more convenient and less confusing to visit a retail store such as Best Buy. Best Buy sells cell phones and plans for each of the providers listed above.. so you can save time by comparing phones and cell plans from all of them.. all in one place. Because they have access to many different types of cell phones, it is very likely that Best Buy may have one that fits your specific needs.
Similarly, if you go directly to a lender they will try to sell you one of their products, which may or may not be the best option for your needs.
But, if you go to a mortgage broker who has access to many different lenders and is more familiar with all of them than you could ever be, you are much more likely to find something that better suits your specific needs. This is especially true for borrowers who are looking for a special arrangement or something other than the standard ARM or fixed rate mortgage.
Another benefit is that a mortgage broker will take care of the paperwork for you. And, if you have questions, he will be a lot easier to get hold of than the loan officer who never returns calls.
But, there can be a potential downside to using a mortgage broker. There is very little regulation at the state or federal levels, so an unscrupulous broker may not give you the best available deal.
Your best bet is to ask your friends and relatives if they know a mortgage broker that they would recommend. Given the increased number of consumers using brokers, it shouldn’t be that hard to get a good referral.