What Are the Benefits of Hiring a Mortgage Broker?

benefits mortgage broker lg

Buying a house for the first time can be completely overwhelming. There is so much to think about. And for getting a home loan, there are a lot of options. So what are the benefits of hiring a mortgage broker?

Here are just a few of the benefits of hiring a mortgage broker:

  • Saves you time and fees (they often charge a flat 1% or 2% fee but can sometimes get you a lower interest rate compared to many banks)
  • Gets you access to more lenders (which can result in more competitive offers)
  • Brokers do the negotiation for you
  • Flexible with meetings and communication
  • Higher chance of getting a mortgage (as they can switch to another lender if you get turned down)

I’m not a real estate broker, but I have bought and sold my own homes at least 8 times during my lifetime. In this post, we’ll dive deep into what mortgage brokers do and how they can help you.

So let’s get to it.

Before we dive in, it’s good to be aware of any issues before you find your dream home.

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What does a mortgage broker do? 

Mortgage brokers are intermediaries between borrowers and lenders. They shop around multiple lenders for their clients to find them the best interest rate with the highest chance of the loan closing successfully.

Mortgage brokers help you find the right mortgage loan.

They can help you find the best terms and rates for your financial situation. Because mortgage brokers have regular contact with a wide variety of lenders, they can steer you away from those with contentious terms.

But if you have questionable credit, they can help connect you with a lender that works with customers in that situation; your bank may not do that.

Brokers will compare the whole mortgage market to find out who is offering the best rates and deals. They can help you save money on interest rates, reducing your monthly mortgage payment.

The majority of mortgage brokers will charge a fee for their service.

They will also get a commission from the lenders they work with. This will vary from broker to broker, depending on the amount of the mortgage.

But in most cases, expect to pay a flat fee of 1-2% of the total loan value as their fee.

For example, the average home price in America right now is $395,284. If you put down a 5% down payment, that means your loan would be (rolling in closing costs aside) $375,519.

So for your loan, your mortgage broker would get a fee between $3,952 and $7,905.

While working with a mortgage broker can be advantageous, keep in mind that the broker’s interests may not be aligned with yours. You may not get the best deal as some lenders will give them bigger commissions than others.

So while I LOVE my mortgage broker, and he’s always gotten me the best deals (I’ve used him for 2 purchases and 2 refis), make sure to shop around a little, so you know the going rates.

Are mortgage brokers better than banks?

Working directly with a bank works well and can save money for people with an established history at the bank and who have an excellent credit score. Mortgage brokers work better for people with spotty credit, who are self-employed or have variable income.

So ultimately, which is better depends on you and your specific situation.

If you’re looking for a one-stop-shop, then a mortgage broker is the way to go. A broker makes getting a mortgage much easier than going at it alone.

They are a good option for folks who have trouble qualifying for a mortgage. They can negotiate rates, and they know lenders that can work with you for your situation.

Working with a mortgage broker to get a mortgage is like working with a travel agent to book a vacation. You only deal with one person who can provide a variety of options. They do all of the leg work while you get the benefits.

But, just like booking your own vacation, there are benefits to securing your own mortgage, too.

Working directly with lenders gives you a more personal connection. They can address your issues right away and can influence what goes on at the bank.

You can also shop around with different banks to get the best rates. Oftentimes, working directly with your bank can get you a discount on closing costs or no-cost origination fees.

Banks also have fewer fees altogether. Mortgage brokers don’t work for free after all.

If you share a bank account with your spouse, it could make it easier to secure that loan, too. The bank will already have both you and your spouse’s financial info, and hopefully, a relationship with both of you.

But securing a mortgage isn’t the only reason to share an account with your partner.

To read more about why couples should share bank accounts, read this recent article. 75% of couples in the US share at least one bank account. Younger couples are less likely to share an account. But they also have higher divorce rates. Is there a connection?

Just click the link to read it on my site.

Do mortgage brokers charge a fee?

Mortgage brokers will usually receive a fee between 1-2% of the value of the loan. It is possible to negotiate this down if the broker initially asks for 2%. The fee can also typically be rolled into the loan rather than having to pay upfront.

It’s important to research mortgage brokers when hiring one, though.

Some brokers are looking to close as many loans as quickly as possible. In those cases, the service and response time to questions can be minimal. It’s quantity over quality for them.

But their level of service will be better than just using an online lender where you never meet anyone face to face or talk on the phone.

But if you value connection, walking into your bank to see the loan officer is the way to go.

Also, mortgage brokers don’t guarantee that you’re getting the best deal. They may have less control over your loan file and can be biased towards certain lenders based on their relationships and commission.

But these days, between Google reviews and Yelp, you can usually see which mortgage brokers in your area have the best reputation.

Can mortgage brokers get you a bigger mortgage?

Mortgage brokers can often get customers a larger loan than a bank may be willing to do. This is because they represent multiple lenders and can shop around to find one that will meet your needs.

However, this could come at a cost in terms of a higher interest rate.

Mortgage brokers have several financial institutions that they can tap into. They can potentially get you a bigger loan amount or a lower interest rate.

Besides hiring a mortgage broker, there are several things you can do on your own to boost your chances of getting a bigger mortgage.

A good start is to raise your credit score.

Paying your bills on time, paying down loans, and paying down your credit debt are all good ways to get started. Raising your credit score is going to take discipline, and you and your partner will both need to stick to a budget.

Want an 800 credit score quickly and legitimately?

I have a recent article that details EXACTLY what steps to take to get that, based on steps I took myself to do just that.

Just click that link to read it here on my site.

Budgeting can help you see exactly where all of your money is going. It can help you see all of those small purchases that don’t seem to cost that much.

It’ll also make you and your spouse more accountable to one another. If you can see where your money is going, it’ll be easier to cut out unnecessary expenses.

To increase your credit score and get that bigger mortgage, you have to be united as a couple on financial goals and choices.

But there’s a lot more about budgeting and getting your spouse on the same financial page.

To learn more, check out this recent article. I got into how to do a budget and what to do if your spouse isn’t on the same page as you.

Just click the link to read it on my page.

Is it cheaper to get a mortgage through a broker?

In many cases, a bank can be cheaper for a mortgage than a broker. But a mortgage broker does have the ability to shop around with multiple lenders, so they are great for customers with a questionable credit history or who have unique income situations.

Generally, if your credit history is good, your income and assets are strong. You could likely save time and money with a bank or direct lender.

If your credit history is spotty or you have a challenging credit report, a broker might be best.

A good mortgage broker will have relationships with a wide variety of lenders. They will know which lenders are lenient on credit and will be more likely to approve your application.

That said, brokers can be just as competitive as direct lenders. Banks can offer a large variety of lending options, just like brokers.

Ideally, you will get loan quotes from both brokers and at least one bank when shopping for a mortgage. This will give you an idea of what to expect from both.

You may find that you can get better options and rates by cutting out the middleman.

Mortgage Broker vs. Direct Lender

Banks are direct lenders, meaning they loan the money themselves. But there are also other direct lenders that are like big banks, including online lenders. Mortgage brokers, by comparison, do not lend any money themselves but have the ability to shop multiple lenders to sometimes get a better deal.

But direct lenders outside of banks typically only deal in home mortgages.

Specialized lenders like Rocket Mortgage or Better Mortgage don’t offer other financial services. They only offer home loans. You won’t be able to get a credit card through them, a checking account, or a savings account.

They typically offer loans for home purchases or refinancing. 

They may also offer home equity loans or home equity lines of credit. Sometimes, they are less conservative than banks. This means that if you have a low credit score or you need a bigger loan amount, a specialized lender might be more likely to loan you money than a bank would.

Direct lenders, whether it’s a bank, credit union, or specialized lender, use their own money to fund mortgages.

Mortgage brokers don’t use any of their own money to fund loans. Instead, they work with a variety of lenders, which gives them access to many products at various price points.

This means you can go to one mortgage broker who will do all of the leg work for you. They will compare multiple loan programs. A mortgage broker will help you understand the closing costs and interest rates, helping you find the best loan for your situation.

Mortgage brokers will do the negotiating for you, and their rates are clearly disclosed on your closing statement.

Direct lenders, on the other hand, give you more individual control over the application process. You select the banks and lenders you want to use. You negotiate your own interest rates and origination fees.

They also deal with your loan from start to finish. You get to develop a relationship of your own with your lender.

Having a relationship with your lender can be invaluable.

They know the inner workings of their company and might be willing to work with you more than they could with a broker. Also, many lenders don’t work with brokers.

Meaning that they could have rates that you wouldn’t be able to get if you were using a broker.

How do I get a mortgage online?

Some of the best online options for mortgages include Rocket Mortgage, Better, and Fairway Mortgage. Simply go to their websites and hit the apply button to get prequalified. Expect to provide details on the home to be purchased, as well as social security numbers and income and tax history.

If you have a pretty straightforward credit history and don’t really care to deal with people, you can get a loan online usually quickly and easily.

I did that once using the now-defunct Ditech Financial. And it worked just fine.

But other lenders like Ally Bank, Bank of America, and Wells Fargo provide both online and traditional banking options as well. Oftentimes, banks will offer discounts and better interest rates to customers that have other accounts with them.

Buying a house for the first time can be confusing and overwhelming.

It’s not just about finding the perfect house. You need to be patient and try to do as much research as you can on your own.

There are so many players involved – your real estate agent, the agent for the seller, loan and title companies, and in some states, attorneys need to be involved, too.

So what are the exact steps to buy a house if you’ve never done it before?

That’s why I wrote this recent article for first-time home buyers. In that article, I lay out all of the steps to buying a house for the first time.

It covers EVERYTHING and is incredibly detailed, so it’s a must-read if you’ve never bought a house before. And I co-authored it with 2 Realtors.

Just click the link to read it on my site.

Should i use my bank or a mortgage broker? | mortgage broker vs bank

Final thoughts

Mortgage brokers can help you sift through loan options, get the best interest rates, and overcome borrowing challenges. But they don’t do it for free. In fact, it can be quite a bit more expensive than working directly with a lender.

But you’re trading expenses for convenience. Will you use a mortgage broker or work with a bank directly when purchasing your new home?

Before you start calling one though, it’s good to be aware of any issues before you find your dream home.

If you don’t have a current copy of your credit report, then we’re just shooting blindly in trying to raise your credit score.

Luckily, myFICO can get you access to your credit score and a copy of your credit report from all 3 credit bureaus (Equifax, TransUnion, and Experian)!

But myFICO does more than just get you a credit report. With their credit simulator, you can see how possible financial choices will affect your credit score in the future!

Get your 3 bureau report today and save 20%!

Learn more over at myFICO and get started today (just click the link to see all the details on their site).

While I have years of successful financial & budgeting experience and run several million-dollar businesses and handled the accounting, P&L and been responsible for the financial assets of them, I am not an accountant or CPA. Like all my posts, my posts are opinions based on experience, observations, research, and mistakes. While I believe all my personal finance posts to be thorough, accurate, and well-researched, if you need financial advice, you should seek out a qualified professional in your area.

Image by Tumisu from Pixabay

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