For most of us, purchasing a home also involves getting a loan to cover the cost. With such a wide variety of loan programs available, it is important to shop around to make sure that you are getting the best loan program available.
As you do this, you’ll soon realize there are two ways of finding a home loan. You can deal with lenders directly, or you can go through a broker. There are critical differences between the two, and its important that you understand what those differences are,
A lender (for instance your bank or your credit union) will work with you directly to transact the loan. The loan representative may have several different loan programs for you to choose from, however, all of the loan options are managed by that particular lender.
On the other hand, a mortgage broker will arrange the loan between you and a lender. The potential advantage to this is that brokers work with several different lenders and therefore may have access to more mortgage programs than you would if you worked directly with a lender.
Once the broker receives your loan application, the broker is in contact with several different lenders, and will attempt to match your needs with a loan program from one of several lenders the broker works with.
Because of this, might be able to find you a cheaper loan than if you contacted lenders directly. Additionally, brokers may be particularly helpful if you have specialized loan needs. For example, if you have a poor credit history, your local lender may reject your application while brokers may be able to find a lender who will work with you.
If you decide to use a mortgage broker, it is important to remember that while the broker may not charge you directly for their services, you will probably still wind up flipping the bill. That’s because the broker charges the lender, who in turn adds the broker’s fee to the loan fees.
Keep in mind that since different brokers may work with different lenders, you can’t place just one call to a broker to ensure you are getting the best loan. Instead, you should contact several different brokers, just as you would if you were contacting different lenders.
Be aware that brokers may not advertise themselves as such, if you are not sure if you are dealing with a mortgage lender or a broker, be sure to ask them
Deciding on whether to get your home loan from a broker or directly lender depends on your individual needs. You should access certain factors such as your credit score, the type of loan you are looking for, and the specific loan programs they can offer you. But knowing the differences between the two and how each one works is an important first step in deciding whether to get a loan from a broker or a to go directly through the lender.