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I need a lender in the US: broker or banker/lender?

Mortgage Brokers and Banks are the two key options among borrowers. Read our blog to find out the best route to go through when applying for a mortgage.

Traditionally, banks cater for most loans and financial services. However, as the financial market grew to accommodate secondary or non-banking financial institutions, mortgage brokers began to emerge and have grown to be one of the largest markets in the US, catering to over 68 percent of all resident loans.

So, why have people leaned more towards mortgage brokerage agencies? What are the advantages of working with brokerage firms and banks? This article examines the strong suits of each home financing option to make your burden lighter.

Mortgage Brokers

Mortgage brokers act as intermediaries between prospective homeowners and direct lenders such as banks and credit unions. They know the tricks of the trade and help borrowers make more informed decisions about home financing. When you approach a mortgage broker for a home loan, they ask a few questions about your work history and examine your credit history, asset to debt ratio, and credit risk rating, amongst other information, to determine the loan options that are available and suitable for you.  

They also search for suitable mortgage products and make recommendations based on these findings. As soon as you settle for a lender, your mortgage broker will then apply for a lender's pre-approval and help you with documentation, legal issues, and every other thing involved in the completion of your mortgage application.

Advantages of mortgage brokers

Mortgage brokers serve as the middleman between a potential borrower. Benefits include;

1. Mortgage brokers provide more options for borrowers
Mortgage brokers provide a wide range of mortgage loan products to borrowers. They work with everyone and everything — banks, credit unions, individual lenders, conventional loans, government-backed loans, and every other entity involved in the home financing sector. They have a business relationship with many lenders and know the kinds of mortgage options they offer. So, it is easier for them to present different mouth-watering options to borrowers.

2. Mortgage brokers ensure a borrower checks all options
Some private mortgage lenders only take clients at the recommendations of mortgage brokerage firms. These lenders offer juicy offers, and you might be missing out if you use the services of a direct lender. Your mortgage broker will also be able to steer you clear of problematic lenders.

3. No need for borrowers to go from lender to lender

When getting a home financing loan, it is advisable to compare products from different lenders. Lenders offer different interest rates, available down payments, loan terms, closing costs, processing time, and many other financial and non-financial aspects of home financing. You need to get the best option for you, and a brokerage firm will allow you to do this without having to go from one lender to another. Your brokerage firm will do that for you.

4. Borrowers can get independent advice from mortgage brokers
Lenders are businesses, and like all businesses, they look out for their own interests first. A brokerage company will be able to give you independent and unbiased advice about all your options and make the choice easier.

5. Using a mortgage broker may save the borrower some unnecessary fees
When working with a new lender, borrowers have to pay different types of fees, including origination, application, and appraisal fees. Your lender might be able to help you reduce these costs. Brokers give lenders a lot of businesses, and there is always an established relationship between them. If you go directly to a lender, you might have to pay all these fees.

6. A borrower is not just a ‘number'
Another amazing part about choosing to get your home loan through a mortgage lender is the human contact you will get from them. Most mortgage brokerage companies are small and establish a human-to-human connection with all clients. Unlike big financial institutions where you are just a file number, mortgage broker firms establish a more personal relationship with borrowers.

7. Using mortgage brokers is time-saving
Purchasing a home requires a lot of research and activities. A mortgage broker might be able to save you some of the stress and time you spend going from lender to lender to compare prices. They would do all the work for you while you achieve your dreams of owning a house without worries or stress.

Individual lenders and banks

Prospective homeowners can get financing directly from banks, credit unions, and private mortgage firms. Unlike mortgage brokers, they are the ones directly providing the loan. You are not going through an intermediary, though you might have to compare the products of different direct lenders before you settle for the best one.

Advantages of individual lenders and banks

Mortgage brokers serve as the middleman between a potential borrower. Benefits include;

1. Individual lenders or banks may process loan faster
Since there is no back and forth through an intermediary, you might be able to process your application loan faster through a direct lender if you bump into the right one. The only thing you need to do is settle for the right lender. As soon as you do, you can have the whole thing over within two weeks or even less. However, brokers help to find the right lenders for the borrower.

2. Direct negotiation
With a direct lender, you are representing your interest directly. You can negotiate directly with your lender without risk of miscommunication since you are not speaking through someone else. Direct negotiation is one of the strong suits of getting your mortgage loan through banks and other direct lenders. However, this requires you to have a solid understanding of mortgage. Otherwise, the lender may take advantage of your ignorance.

3. Individual lenders/Banks provide less ‘conflict of choice’
If you find it difficult to make a pick when provided with different options, you might do better to go through a direct lender. Mortgage brokers offer a wide range of options and advise you on your best option, but the decision is still in your hands. On the other hand, a direct lender poses fewer issues with choice.

Final thoughts

Now that you have read the pros of getting your home financing loan through a bank or broker, you can make a pick and get closer to your dream of buying a new property. Happy hunting!

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