If you’re thinking about buying a house, you’re going to need a mortgage. And if you’ve thought about applying for a mortgage, maybe you’ve even thought about hiring a mortgage broker. But, what is a mortgage broker, and why do you need one?
A mortgage broker is an individual or company that acts as a “go-between” between you and the lender from whom you get your mortgage. When you find a mortgage broker, they will search many mortgage deals and packages that are offered through many different lenders, to find the mortgage deal that’s best for you. Many homeowners often wonder if they’d be better off just going to the local bank they’re used to doing business with, rather than going to the trouble of finding a mortgage broker. That generally isn’t the case; mortgage brokers hold many benefits over banks when it comes to finding a mortgage.
The first and biggest advantage that mortgage brokers hold over banks is that they aren’t there to just push one product, or promote one company. They represent many different lenders, anywhere from 25 – 100 depending on the broker. Having this many options will give you the best deal possible on your mortgage.
People who have a poor credit history, or can only pay a small amount for their down payment, also generally find that it’s easier to obtain a mortgage through a mortgage broker than it is a bank. Banks require things like high credit scores and a hefty down payment, whereas mortgage brokers can be much more flexible on these things. Mortgage brokers sometimes also offer their own mortgage insurance, insurance that’s required when less than a 20% down payment is made. Being able to make these kinds of arrangements in such a flexible manner means that more people can obtain a mortgage – people who maybe wouldn’t have been able to otherwise.
Another area where mortgage brokers are much more flexible than banks is when it comes to payment policies and arrangements. While you won’t even be making your payments to the mortgage broker, but to the lender who you obtained your mortgage from, a mortgage broker still has an entire network of lenders that they have built professional relationships with over time. Therefore, they’re better able to negotiate with the different lenders, and you benefit with the better deal. Banks on the other hand, usually have very strict payment policies and procedures; and should you default once, there could be severe penalties.
Many think that because they’ve been a loyal customer to their bank for a certain number of years, their bank is going to repay them with big discounts on their mortgage. However, that’s not the case. Because it’s more difficult for many people to obtain a mortgage through a bank, banks are always trying to offer new packages and discounts to the small percentage of new customers that are eligible to obtain a mortgage with them. However, these discounts generally aren’t available to customers that have been with the bank for their mortgage for several years. So you’ll be left paying that high interest rate with no discount, while new customers pay much less for their mortgage than you do.
There’s a reason that half of the mortgages in the United States are obtained through a mortgage broker – they usually offer much better deals!
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