Now that you’ve made the decision to buy a house, the next step is getting your financing together. Applying for a home loan through your personal bank may seem like the obvious choice, but this isn’t the only place to secure financing. You have the choice of working with a mortgage lender or a mortgage broker.

Some people use the terms “broker” and “lender” interchangeably, but these are not one and the same. Before you can decide which one is the right fit, you have to understand how brokers and lenders differ.

What is a Mortgage Broker

A mortgage broker is not a bank or lender, but rather a middleman that connects borrowers with lenders. Mortgage brokers represent lenders and their loan programs. These professionals are mortgage experts, so they’re in a position to explain and recommend various loan products based on your circumstances.

Shopping around is one of the best ways to find a mortgage with a low interest rate. But since comparison shopping can be tedious, you may not have the patience for the job. A mortgage broker does the legwork for you. Your broker researches programs and presents the findings to you, at which point you can choose a particular loan.

Using a broker saves time because it offers a faster way to find and compare mortgage options. Without a broker’s service, you would have to contact banks individually to learn about their rates and products.

What is a Mortgage Lender?

A mortgage lender is an actual bank. This can include commercial banks, community banks, credit unions, etc. If you have a preexisting relationship with a bank, using this institution for a mortgage can be beneficial. It’ll be easier to speak directly with a loan officer and underwriter; and depending on the strength of your relationship, you may receive a more favorable mortgage rate. When you work with a mortgage broker, the broker communicates with the bank and you might never speak with the decision maker.

Which Should You Choose?

From a financial standpoint, you may save money working directly with a lender. Whether you use a broker or a lender, you’ll pay for services. Brokers receive payment in different ways. The typical loan origination fee for a mortgage is 1% or 2% of the mortgage loan. A bank may only charge a 1% fee, whereas a broker may charge 2% and split the fee with the lender. Then again, a broker may charge a flat fee for services, which is included in your closing costs.

Be aware that some mortgage brokers may increase your mortgage rate as compensation. If your broker can get you to pay a higher mortgage rate, the company may receive a bonus from the lender.

Bottom line: a broker is an excellent choice if you’re seeking information on various loan programs, but you don’t want to contact banks individually. Just make sure you ask questions and understand how your broker gets paid.

Imagine this scenario: You find the house you adore. You do the legwork on mortgage loans and get pre-qualified for the right amount. The price is more than reasonable and the buyer is happy to accept the offer you put in. You are on Cloud Nine and diligently work to submit your required paperwork to the lender. A few days or weeks go by and you finally here from the lender – they have rejected the home you want. It is a nightmare that does happen to home-buyers. The question is how is it you can get so close to closing and lose the entire deal based on the lenders decision.

Home Rejection Rationale

Provided your loan application was completed and included all requirement documentation per the lender, the denial could be for several reasons that are not actually house related. Here are some of the other reasons for a rejection: Continue reading →

When you are k a mortgage loan, you must first check out the variety of lenders who say they can help. A mortgage is serious business and it can also be a complex process that too few potential homebuyers truly understand. Without clear knowledge of what to expect and what the mortgage loan process involves, buyers risk defaulting when they can’t keep up with the financial obligations because they didn’t understand the contracts they were signing.

Meeting with a mortgage lender is a good way to clear the air and really get to know the process of applying for and closing on a loan. It is important you find a lender that will work with your specific financial situation and be willing to details the process for you.

Here are 5 things to ask a potential mortgage lender before you sign on the dotted line: Continue reading →

With many big decisions in life, it makes sense to have a source to go to when you need help in understanding a deal. There is no greater time to need help than during the process of finding a mortgage loan. Because loans nowadays come in all shapes and sizes, it is wise to be selective in your choices and diligent in your research.

A mortgage broker can be a resource for guidance through the selection process. The broker will not actually make the home loan for you but will guide you through the process of selecting the right lender. With so many deals to be hand, a mortgage broker can help be sure you have covered all of your bases.

Here are the benefits and disadvantages consumers may experience when working with a mortgage broker: Continue reading →

After the recent crisis in the mortgage industry, consumers are rightly concerned about the lender they choose to handle their own mortgage loans. Fear of schemes, scams, and con men have driven consumers to be more astute at selecting a lender. This is good news for everyone involved and with more consumers checking out lenders before making a commitment, the mortgage world can be a safer place.

Selecting the right lender for you is not as impossible as you may think. Here are some tips for finding the lender who will meet your needs and see you successfully through the mortgage loan process:

Be Prepared

Rushing through the process of finding a good lender with the right mortgage loan for you is the biggest mistake you can make. By understanding first-hand where your credit score lies and knowing what answers you need to find, you can conduct a more thorough search for the perfect lender. Get your facts together and know what kind of loan you are looking for, what price range you are considering, and how fast you want to act. Never be in a hurry to get a mortgage loan because the mistakes you can make in a rush will cost you financially. Continue reading →