Understanding the Role of Mortgage Brokers

Most people assume they should go to their local bank to get a mortgage, but most end up disappointed with the results. This is because banks are for borrowers with great qualifying factors and nothing ‘out of the ordinary.’ Unfortunately, this doesn’t describe most borrowers today. The question is, why should you use a mortgage broker?

If you’re ready to apply for a mortgage, here’s why you should use a mortgage broker instead of a bank.

Comparing Banks and Mortgage Brokers

First, you probably wonder what the difference between a bank and a mortgage broker is. They both offer mortgages, so why is one better than the other? And why you should use a mortgage broker?

Banks are direct lenders. They have only a few programs they can fit you into, and if you don’t meet the qualifications, they can’t give you a mortgage. On the other hand, mortgage brokers are the middleman between you and hundreds of lenders, giving you many more options.

How do Banks Work?

When you apply for a mortgage at a bank, you complete a loan application and talk to a loan officer. You might meet at a local bank or speak on the phone.

The loan officer will review your options, which may be one or two loans depending on what they offer. Then, you’ll receive a rate quote, and you’re left to decide if the loan is right for you. If you want to look at other options, you must repeat the process at each bank.

When you compare your options, you might not be comparing apples to apples. Each bank has different fees and programs. For example, one bank may charge much lower rates than others but have much higher fees, resulting in a higher APR. Without the guidance of a professional, you’re left on your own to decide which loan makes the most sense.

If you choose a bank, you’ll work directly with the loan officer at the bank to process and eventually close your loan.

While banks might be right in certain situations, there are many reasons why you should use a mortgage broker instead of a bank.

How do Mortgage Brokers Work?

Mortgage brokers are the middleman between you and many lenders. So if you’re shopping around for the right loan, a mortgage broker can help you choose a loan much faster and with more options.

Mortgage brokers have relationships with many lenders, making it easier to match most borrowers with the right loan. Even if you have a lower credit score or unique qualifying factors, mortgage brokers work with many types of lenders to help you find the right loan.

Working with a mortgage broker is like having your own agent help you find the perfect loan. You complete one loan application yet have access to many loans. Your loan officer can make choosing the right loan easier. Together you’ll look at what makes the most sense based on the monthly payment, interest rate, and fees.

There’s no fee to work with mortgage brokers, so borrowers have nothing to lose and everything to gain. But that is not the only reason why you should use a mortgage broker.

The Pros and Cons of Working with a Bank

Like any personal finance decision, there are pros and cons to working with a bank. Here’s what you should consider.

Pros:

  • If you already feel comfortable working with a certain banker, it might make the loan process less stressful
  • You might be able to get all of your financial services in one place
  • You may have less documentation to provide if the bank already has a lot of your financial information

Cons:

  • Banks have a limited number of loan programs available
  • The turnaround time can be slow
  • If you shop around, it’s your responsibility

That said, there are certain situations when you should use a bank, but most borrowers do better with a mortgage broker. Let’s know more about why you should use a mortgage broker.

The Pros and Cons of Working with a Mortgage Broker

As you consider why you should use a mortgage broker instead of a bank, here are some pros and cons.

Pros:

  • Mortgage brokers handle the legwork, making it easy to compare offers and choose the best loan
  • Mortgage brokers have options for borrowers with unique qualifying factors
  • Loan officers with good relationships with their lenders may be able to get your loan turned around faster

Cons:

  • Brokers don’t have control over your file; they are at the mercy of the lender
  • Not all brokers work with all lenders, so you might miss out on a program or better deal
  • You only talk to your mortgage broker, never the lender directly

Why you should use a Mortgage Broker Instead of a Bank – Specific Situations

Mortgage brokers and banks offer the option to secure mortgage financing, but there are certain situations when you should only consider a mortgage broker.

You Have Unique Qualifying Factors

Banks prefer straightforward loan applications and qualifying factors. If you work for yourself, have a low credit score, or have a unique income situation, you likely won’t find the loan you need at a bank.

Banks prefer to work with borrowers with pay stubs, W-2s, stable employment, large down payments, and great credit. This doesn’t describe many people you know, right?

Working with a mortgage broker provides access to many other loan programs that you otherwise wouldn’t have. For example, rather than listening to a bank turn you down, you can have multiple choices for a loan. Many people ask why you should use a mortgage broker because they don’t know this.

You Aren’t Sure How to Qualify for a Loan

A mortgage broker is much more likely to help prepare you for the loan process than a bank. If you apply for a loan at a bank, they expect you to know what you’re getting into and to have the proper documentation. And this is a big reason why you should use a mortgage broker.

On the other hand, a mortgage broker can work with you early in the process, teaching you about the necessary documents and how to improve your credit or informing you how much money you need to have for a down payment. Still don’t know why you should use a mortgage broker?

Think of a mortgage broker as your guide through the mortgage process. They’ll help you understand your options and how to get the best deal on your mortgage. They aren’t trying to fit you into a loan you don’t qualify for because they have hundreds of loan options.

You Need an Ally

One of the best reasons why you should use a mortgage broker instead of a bank is that a mortgage broker has your back. But, of course, you probably can’t say that about too many banks, right?

When you go to the bank, it can feel cold and calculated. They treat you like a number, not a person who cares about the loan they get and how it affects their personal finances.

A mortgage broker is like your ally. They will stand up for you when a lender turns you down or will be your voice when the underwriter needs an explanation. If you don’t have a straightforward file, you want a mortgage broker on your side, getting to know you and explaining your situation to lenders so you get approved. Need to know more on why you should use a mortgage broker?

You Want to Shop Around

Everyone should shop around to get the best mortgage rates. But with the mortgage application process so intensive, many people don’t. Instead, they take the first loan offered and don’t compare their options.

Savvy borrowers shop around to get the best rates and terms. They work with a mortgage broker who helps them understand their options. There’s more to it than getting the lowest interest rate or the lowest fees.

A mortgage broker will sit with you and help you see the big picture. For example, how much will the loan cost you over the time you’ll be in the home? They’ll also go over different scenarios with you. For example, if you know you’ll move in a few years or refinance, certain loan programs work best to save you the most money. Now you know why you should use a mortgage broker, right?

If you’re taking out a loan for your ‘forever home’ and don’t want to refinance, you might fit better into other loan options.

Your mortgage broker gets to know your situation to help you choose the right loan rather than trying to fit you into one of a handful of loans banks offer.

Why Choose a Mortgage Broker Over a Bank

It comes down to a few simple factors if you want to know why you should use a mortgage broker instead of a bank.

You’ll get more personalized service, better rates and terms, and understand the loan process better. An informed borrower is a powerful borrower, and that’s what you’ll be when you work with a mortgage broker.

Still have questions on why you should use a mortgage broker?

At Co/LAB Lending, we offer the highest level of customer service, ensuring our borrowers understand their loan options and have access to the best rates and terms. In addition, we make the loan process as simple as possible, eliminating the stress and overwhelm that usually comes with applying for a mortgage.

If you’re ready to buy a home or refinance your existing home, contact us today and let our loan officers help you get the best mortgage for your situation.

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