You know you want a mortgage, but how do you get started? When looking into financing for your home, you will come across two main types of mortgage providers, mortgage lenders, and mortgage brokers. They may have a similar process but there are some key items to consider when deciding. Here is a quick guide to help you determine which one will work best for you.
What is a mortgage lender?
A mortgage lender will lend you the money for your mortgage. They are the ones who will analyze your credit, income, and debt to determine loan eligibility. Once they decide on the terms of your mortgage, they will lend the money for your mortgage from their own capital. Often, they will bundle these loans and sell them to investors.
What is a mortgage broker?
A mortgage broker is very similar to a mortgage lender but they do not lend the money for mortgages. They act as a broker service and work with many lenders to give you a variety of options.
Using a mortgage lender:
When you work with the same operations team (underwriting, processing, etc.) you develop a process that is reliable and fast. Unlike a broker, lenders can control the loan process and have a stronger level of accountability.
Expert product knowledge
Since the mortgage lender is lending the money, they have set guidelines per program they must know. A mortgage broker may have 3-4 sets of guidelines per program since they aren’t lending the money. This means that a mortgage lender will have superior product knowledge over a broker.
Direct Operations Staff Relationships
When preparing your loan, mortgage lenders tend to work with the same set of operations staff. So they know exactly what they are looking for. Developing relationships with these support staff allows them to prepare loan files they are more likely to accept, process, and fund without running into roadblocks.
Using a mortgage broker:
A mortgage broker can shop for a variety of different lenders. This means that they are able to find different pricing and guidelines that the lender could not. Through the broker relationships they have developed they can often find discounted pricing (however, you will likely pay a fee for using this service).
A mortgage broker has a pool of options when it comes to finding the right loan product. If you have unstable income or risky credit, the broker can shop around and find a lender that will get the deal done.
Ultimately, who you use will depend on the situation you are in. If you are looking for less risk and more stability in the mortgage process, you will want to opt for a mortgage lender. If you are comfortable with instability and want more choices, you may want to use a mortgage broker.
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