If you’re getting ready to buy your first home, odds are you’ve heard a bit about home financing by now. Perhaps you’ve even heard some relevant horror stories?
The truth? Working with an experienced and passionate home financing professional, like a mortgage broker, is nothing to be afraid of. In fact, these individuals may be able to help many potential buyers like yourself finance their dream homes, regardless of certain perceived credit, debt or income issues. And they may just save you some money along the way.
The Two Main Types of Home Finance Professionals
As you prepare to purchase a home, you’ll likely find two main sources for a mortgage loan: non-bank mortgage brokers, and loan officers providing mortgage loans through their banking institutions.
With qualifying credit, down payment and debt-to-income ratio, either one can help you find the funds needed to become a homeowner. Because everyone’s path to homeownership is unique, be aware that each type of home finance professional will offer a different experience, and one may speak more to certain borrowers than the other.
What is a Mortgage Broker?
So, what exactly is a mortgage broker? Mortgage brokers are third party home finance professionals who act as an intermediary between the borrower (you) and the lender (the financial institution or mortgage bank). Unlike a representative of a bank or credit union, they do not use their own funds to originate a mortgage loan. Instead, they seek to connect homebuyers with home financing options that make the most sense based on their unique situation.
Retail loan officers are the other type of home loan professionals you may have heard of. Retail loan officers are individuals employed by and representative of a banking institution. They connect borrowers with their bank’s own programs and then provide mortgage loans with that bank’s funds. As such, they may not offer certain loan types or terms that other institutions might. They can only provide you with the offerings of their own institution.
What are the Benefits of Using a Mortgage Broker?
If you choose to work with a mortgage broker as opposed to a retail loan officer, you’ll have a representative shopping around, gathering loan options, compiling paperwork and only charging a fee when you’ve found the perfect fit.
In other words, working with a mortgage broker is nothing to be scared of.
In fact, three of the main advantages these professionals may be able to provide include:
- Offering a larger variety of home loan options, including rates and terms
- Providing more flexibility around your qualification requirements
- Helping you compare your options and select a home loan suited to your needs
So, if you’re looking for the right fit for your homebuying team, read on to learn more.
Mortgage Brokers May Be Able To Offer a Larger Variety of Home Loan Options
Because mortgage brokers investigate many different avenues for home financing options, you might find a much larger variety of home loans when you work with one of these professionals.
So, if you’re a potential buyer with a non-typical financial situation or if the one-size-fits-all mortgage options at your local bank just don’t cut it for you, the collection of loan options a mortgage broker may be able to provide might be beneficial.
Essentially, knowing your options is never a bad thing! Perhaps your local bank can offer the best mortgage loan for you. On the other hand, perhaps not.
Mortgage Brokers Can Offer More Flexibility
Unfortunately, for some borrowers, the bank may simply deny their loan application outright due to low credit, a larger-than-allowed debt-to-income-ratio or other prohibited characteristic. This experience can be frustrating and disappointing, leaving the borrower to wonder how they can possibly continue down the path to homeownership.
A mortgage broker, on the other hand, may be able to connect you with loan products that offer more flexible requirements. Most brokers have a well-developed body of lenders they work with regularly, which may be able to make finding and securing a personalized loan that much easier.
Again, if you’re a perfect candidate for a conventional loan, a bank or credit union may make sense. If you’re curious about other options, have a unique financial situation or would just like to be more involved in the process, though, working with a mortgage broker could be the answer.
Mortgage Brokers Can Save You Money
Of course, with more options to choose from and more flexibility, potential savings can be significant.
For some borrowers, working with a mortgage broker over a retail loan officer could even mean the difference between an overpriced one-size (doesn’t) fit all mortgage loan and finding the right, more affordable loan to secure their dream home.
It’s also important to remember that loan officers at a bank or credit union often work in originating a wide variety of loans in addition to mortgages. This might include personal loans, auto loans, small business loans and more. While that’s great when you’re in the market for a new car or starting up a business, when it comes to financing a home purchase, what most borrowers want is someone with specialized home loan experience.
All mortgage brokers in the US are licensed and regulated, and they focus solely on home loans. In a continually difficult (and expensive) seller’s market, this degree of specialization is near-priceless.
Working With a Mortgage Broker: Final Thoughts
Interested in or curious about working with a mortgage broker?
The choice of mortgage professional is a highly personal one, and certainly won’t be the same for each and every buyer. To ensure you’re making the right decision, start by weighing the pros and cons, familiarizing yourself with your financial situation, talking to your real estate agent and network, and perhaps even meeting with a mortgage broker and retail loan officer before making your final choice.
While the best fit will truly depend on your homeownership goals, your financial situation, and your preference, most buyers could likely benefit from the individualized experience a broker can provide in one way or another.
Published on November 1, 2022
