What are the Benefits of Working with a Mortgage Broker?
It might seem simple to walk into your bank and ask for a home loan, but there are some key advantages to working with a mortgage broker instead. Many people just aren’t familiar with how the broker model works and why it's advantageous for consumers. After all, why would you use a middleman when you can go directly to the bank? How can you possibly benefit from using a mortgage broker?
It's important to understand the difference between how a mortgage broker vs. a bank function so you can find the best home loan for your financial situation.
First things first…what is a mortgage broker?
A mortgage broker acts as an intermediary between borrowers and lenders. They assess your financial situation, including credit score, income, and down payment capacity, to determine how much you can borrow. Then, they search through various lenders to find the best terms and rates tailored to your needs. Once the best loan option is found, they handle the transaction as your main point of contact between you and the lender until your loan closes.
Let's dive into the details. What are the benefits of working with a mortgage broker?
1. More Competitive Rates Through Wholesale Lenders
Mortgage brokers have access to wholesale lending rates, which are typically lower than the rates offered directly to consumers by banks. This is because lenders are motivated to work with brokers as they help advertise, process, and reduce their overhead costs. Basically, wholesale lenders offer brokers their rates at a discount because the broker does the work of finding the client, communicating with all parties, and processing the loan on their behalf.
Since mortgage brokers operate independently and have lower overhead costs compared to banks, they can pass on the savings to borrowers by offering more competitive rates. This means that when you work with a mortgage broker, you're often able to secure a mortgage at a lower interest rate compared to what you might find if you went directly to a bank.
2. Wider Range of Loan Options & More Transparency
If you go to a bank, they are only able to offer you their loan products and rates. They might have the best rate for a specific mortgage on a certain day, but no single bank always has the top rate for every program. For example, they might charge more than other banks to buy down the rate or push one product over another that is more profitable to them. That's why a mortgage broker’s role is to understand your unique financial goals and guide you to the best lender for your specific needs. Whether you're considering a fixed vs. adjustable rate, a conforming vs. a jumbo loan, or a reverse mortgage loan, a skilled mortgage broker can secure the best rate for each scenario by shopping their different lenders. Additionally, if you're not entirely familiar with the various financing options, brokers offer advice and guidance, whereas a bank may primarily steer you towards their most competitive products.
Additionally, mortgage brokers’ compensation is highly regulated so that they have no financial motivation to bring you to one lender over another. Their compensation (a percentage of the loan amount paid by the lender) is required to be the same for every borrower (even friends and family!). It cannot vary based on which lender or product they match you with. This ensures that a broker is looking out for the client’s best interests and not their compensation package when matching you with a lender.
3. Provide Better Service
Bank employees work 9 to 5, but most real estate transactions occur in the evenings and on weekends when people are off work. It can be very frustrating for clients and their realtors who need to communicate with their loan officer, but cannot get a call back outside of banking hours. Mortgage brokers don’t get paid an hourly wage to sit behind a desk and are therefore more motivated to work on evenings and weekends to support their clients and realtor partners–after all, this is how they build relationships and repeat business.
Unlike salaried bank employees, mortgage brokers are only paid when a loan closes. If you aren’t happy and if you don’t close your loan with them, the broker won’t get paid a dime regardless of the amount of time or work put in. This means they are personally invested in your satisfaction and will go the extra mile to ensure everything runs smoothly. In the event of any hiccups, a broker is more motivated to resolve issues and help you close on time than the salaried bank employee might be. Brokers’ livelihoods are dependent on referrals and repeat business, so they are more motivated to work hard for the client and offer top-tier service.
4. Your Advocate in the Process
Choosing to work with a mortgage broker means you have a dedicated representative who prioritizes your interests above all else. While a bank employee's loyalty ultimately lies with their employer, a broker's allegiance is firmly with you, the client. Mortgage brokers work for the client, not any one bank.
While it may seem convenient to approach your existing bank for a home loan, opting for an independent mortgage broker can offer significant advantages in terms of savings and service. Ultimately, the decision comes down to what aligns best with your unique financial needs and preferences.
Are you looking to purchase, refinance, or obtain a reverse mortgage loan in California? Castle Funding Corp. is a family-owned mortgage company based in Ventura, CA, but assists clients with their home loan needs throughout California. For a personalized rate quote and expert guidance tailored to your specific situation, click the button below.