This is one of the questions you might be asking yourself as you seek a mortgage for your first home. To determine whether you should consider using the services of a mortgage broker, you must first understand the role that the mortgage broker serves in the market.
The Role of the Mortgage Broker
Direct lenders are interested in their own bottom line; they place their self-interest first. But a mortgage broker represents you. He or she will handle all the comparison shopping of lenders as well as all the details of the loan application. The broker represents the link between you and the lender. Using a mortgage broker has both advantages and disadvantages.
The Pros of Working with a Broker
Mortgage brokers represent some of the major lenders in the country, which means they understand the various programs that each lender offers. If you go directly to a specific lender, will only be presented with the programs that particular lender has to offer. But you have wider a choice of financing options when you work with a mortgage broker.
Banks have strict requirements that buyers must meet to qualify for a mortgage. A mortgage broker has the experience to know how to cast your qualification in the best light to give you have the best chance of getting lender approval. In fact, you might end up with a better deal than if you had contacted the lender directly.Because of their lack of experience, first-time home buyers often waste valuable time mortgage shopping. A broker knows which banks are likely to finance your loan and will handle the details of presenting your application to various lenders.
Applying for a mortgage involves a lot of paperwork. A good broker does all the hard work and will present your circumstances and qualifications in a better way than an inexperienced buyer could. If a lender sees you as a reliable risk, it is much more likely to grant your loan request.
Banks evaluate certain criteria in deciding whether to issue a loan, including your credit score and your income. Many first-time home buyers have suffered an unavoidable situation in their past, such as a bankruptcy, that damaged their credit standing. In such a situation, most banks would likely decline a loan to a direct applicant. But an experienced broker is much more likely to obtain a home loan, even if your credit report is somewhat tattered.
In today's market, banks are lending less and less, and qualification criteria are tougher than ever. Finding a mortgage can be especially difficult for first-time home buyers. However, a broker has built a professional relationship with individual banks that can make it easier for you to get a mortgage, even in today's tough market.Most brokers go beyond their call of duty; they do a lot of work chasing lenders on your behalf. This takes a lot of stress off the shoulders of a first-time home buyer. And a broker can help you get the best rate on the mortgage. If one lender he or she works with offers a lower rate than the others, the other lenders are more likely to lower their own rates to be competitive. The home buyer is the one who benefits.
The Cons of Working with a Mortgage Broker
The main demerit of working with a mortgage broker is that the home buyer is required to pay some extra fees. The lender will still charge you a processing fee, but the mortgage broker charges you for his or her service. Working with a broker can give you a better deal, but you'll pay slightly more closing costs. This can be offset by borrowers who have a good credit rating, because banks are more likely to offer a lower rate to better-qualified buyers.