What\u2019s more, more than three-quarters (77%) applied to only one lender in the end.<\/p>\n
Now that you\u2019re an older, wiser homeowner, you know that every dollar saved counts. As you think about who to go to for your refinance or next mortgage, you\u2019ve got a second chance to do your due diligence.<\/p>\n
That\u2019s where a mortgage broker can help find a loan that best matches your needs, but you also might be better off comparison shopping on your own. Understand the pros and cons of working with a middleman who connects borrowers with lenders before you sign up for any extra fees.<\/p>\n Some people use the terms \u201cmortgage lender\u201d and \u201cmortgage broker\u201d interchangeably, but they\u2019re quite different. A mortgage lender is a financial institution such as a bank or a credit union that makes loans directly.<\/p>\n A mortgage broker doesn\u2019t lend money; rather, he or she works with many lenders to find the right deal<\/a> for someone in need of a mortgage, according to the Consumer Financial Protection Bureau (CFPB), a U.S. government agency that regulates the offering and provision of consumer financial products and services.<\/p>\n That said, some financial institutions operate as both lenders and brokers<\/a>, so you should ask the financial institution that you\u2019re working with whether a broker will be involved and collecting any fees<\/a> on your transaction.<\/p>\n A mortgage broker acts as a matchmaker between consumers and lenders, offering loans from a variety of lending companies and more choices in terms of both rate and loan types.<\/p>\n Freddie Mac, the congressional entity chartered in 1970 to provide liquidity, stability, and affordability to the US housing market, reported in April 2018 that consumers who obtain five rate offers save an average of about 16.6 basis points, or 0.166%, on their mortgage rate.<\/p>\n For a typical $250,000 loan, obtaining one additional quote could save an average of $1,435. Receiving five rate quotes could save an average expected benefit of $2,914. Mortgage brokers also might be able to get lenders to waive certain fees.<\/p>\n With tightened lending standards in the wake of the subprime mortgage crisis, it can be difficult to get bank approval for a loan, or get a loan with favorable terms, if you have:<\/p>\n While you might only be considering the most common loan options like a 30-year fixed, 15-year fixed, or adjustable rate mortgage, a mortgage broker has access to hundreds of different loan products across various lenders in their network and may be able to find you an option that suits your needs.<\/p>\n \u201cInnovative mortgage strategies and sophisticated solutions are the advantage of working with an experienced mortgage broker,\u201d explains 5-star lender Mortgage Advantage.<\/p>\n You can get a feel for different lender fees online, but truly shopping around for more than one mortgage on your own requires that you apply individually to every lender from whom you collect an exact quote.<\/p>\n Not only is that labor intensive, but each lender will run a credit check, and the act of pulling a credit report in and of itself can damage your credit.<\/p>\n You also won\u2019t know which lender will save you money one way or another until the lender\u2019s crunched the numbers on the rates, terms, origination costs, and lender credits.<\/p>\n With multiple quotes in hand, you can go to one lender and say, \u201cHey, I like working with you, but John Doe across town will save me $2,500 in closing costs with his special lender credit.\u201d<\/p>\n But a mortgage broker collects that information and negotiates on your behalf, while you only have to fill out a single application before deciding on a lender.<\/p>\n Brokers work off commission\u2014typically 1 to 2% of the total loan amount<\/a>\u2014and because of this, some might be incentivized in getting you into a mortgage or refinancing deal that maximizes what you qualify for but isn\u2019t entirely right for you.<\/p>\n Because of the 2008 housing market crash<\/a>, federal regulations such as the SAFE Mortgage Licensing Act<\/a> now forbid brokers from taking premiums from lenders in return for steering customers into high-risk, higher-priced loans that they can\u2019t afford.<\/p>\n Even so, you want to be sure that you\u2019re getting the best offer for your circumstances.<\/p>\n As mentioned above, mortgage brokers will typically get a certain percentage of your mortgage as payment.<\/p>\n So you have to determine whether the savings they can offer you by finding the best deal and negotiating fees will exceed that which you pay them to do the work.<\/p>\n \u201cWith today’s technology, you can simply use a search engine to find hundreds of lenders to work with,\u201d explains an article by Mortgage 101.com<\/a>, a site founded in 1996 that\u2019s dedicated to educating online consumers about the mortgage process founded.<\/p>\n \u201cYou will then be able to compare all of the different offers that are available from these lenders and try to find the best one for your unique situation. You may not necessarily need to pay a mortgage broker for something that you can do on your own.\u201d<\/p>\n What\u2019s more, some types of mortgage products, such as jumbo loans<\/a>, or higher-priced mortgage loans, may only be available if you\u2019ve developed a long-term relationship with a lender.<\/p>\n As explained by the New York Times<\/i><\/a>: \u201cIf brokers offer clients variety, mortgage lenders have the advantage of control. Because the bank is the one lending the money, the bank makes the decisions.\u201c<\/p>\n A bank could more nimbly make a one-off decision, like a \u201csmall exception\u201d to fund an unconventional loan, for example (so long as they were within the bounds of government regulations).<\/p>\n A mortgage broker, on the other hand, doesn\u2019t have that direct lending power.<\/p>\n Just like you should shop around for a mortgage lender, experts recommend vetting mortgage brokers, too.<\/p>\n The National Association of Mortgage Brokers has a searchable database of brokers<\/a>, or \u201cLending Integrity Professionals,\u201d who meet stringent criteria, including undergoing national criminal background checks and attending professional education regularly, including ethics training.<\/p>\n In addition, the Nationwide Mortgage Licensing System & Registry maintains a database of licensed mortgage brokers<\/a>. The CFPB suggests checking if any disciplinary actions have been filed against a broker by checking with the appropriate regulator in your state. (The Nationwide Mortgage Licensing System provides an online form of state contacts<\/a>.)<\/p>\n![\"\"](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2018\/11\/mortgage-broker-phone.jpg\")
<\/a>What is a mortgage broker?<\/h2>\n
The pros and cons of using a mortgage broker<\/h2>\n
Pro 1: Find better rates than you would shopping on your own<\/h3>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2018\/11\/spreadsheet-mortgage-broker.png\")
<\/a>![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2018\/11\/mortgage-broker-camera.jpg\")
<\/a>Pro 2: Brokers can help secure a loan for those with non-traditional jobs or income sources<\/h3>\n
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Pro 3: You only need to send in one application to review your mortgage options<\/h3>\n
Con 1: Mortgage brokers get paid by commission, so they\u2019re incentivized to get you a higher loan<\/h3>\n
Con 2: There\u2019s no such thing a free lunch\u2014or a free mortgage broker<\/h3>\n
Con 3: Going lender-direct has its advantages<\/h3>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2018\/11\/mortgage-broker-man.jpg\")
<\/a>Don\u2019t just comparison shop for mortgages\u2014weigh your mortgage broker options just as carefully<\/h2>\n