What are the Pros and Cons of using a Mortgage Broker?

There was once a time when shopping for a mortgage was as easy as heading to your local bank and sitting down with a mortgage professional to go over your options; it sounds like a standard process, right? It sure does…but, times have changed, there are lots of options on the table now. Let’s get into the “broker vs banker” debate and help you look at some of the pros and cons.

First things first – what is a mortgage broker?

A mortgage broker is an independent mortgage professional that can help individuals secure a residential or commercial loan against real property. When you book an appointment with a mortgage broker, you book an appointment with all banks, credit unions, and trust companies. An experienced mortgage broker, working at a large firm will likely have access to more than 200 different lender options. In 99% of cases, mortgage brokers are paid by the lenders, there is no cost to you.

The Pros

Easy: Full-service shop for anything mortgage-related. It usually takes one meeting, whether it is by phone or in person. Any documentation that is required can quickly be sent through email.

Not Cost: You do not pay the brokers; the lenders pay them. (To note: when dealing with private lending, sometimes a mortgage broker will charge a fee for their service. This will have to be OK’d by you prior to proceeding with securing the loan).

Rate Options: Brokers have information and access to more rates, as well as the best low rates. They receive discounts from their top lenders, which means more access to lower mortgage rates, rates that you would most likely be unable to negotiate for yourself.

Access: Brokers break it down for you and make it easy to compare different lenders. A bank can only offer the products they have in-house.

Advice: Brokers can navigate and provide you with expert advice since their job is dealing with mortgages. They are used to working with borrowers daily, and they know the unique needs of each one. Personal: A good broker will move mountains to get you the best rate and product since they are independent, and they do not work for individual lenders. They can discuss the best options for you and narrow down the costs.

One Credit Check: Using a mortgage broker means that your deal can be sent to 200 lenders with one credit bureau hit. This is MUCH better for your credit than having each individual financial institution pull your credit and drop your score.

Access: When you’re dealing with a mortgage broker, you’re very likely calling their personal cell phone. You’ll be able to access them quickly, efficiently and most likely on evenings and weekends. This is important because we all know that Real Estate doesn’t happen Monday to Friday.

Cons of going with a mortgage broker

Working with a stranger: You'll be working with a new person for the application process, so you may want to do some shopping around to make sure that there is a relationship fit between you and the broker.

Potential Lack of Access: Not every broker has access to work with all lenders. You will want to do some research to make sure that your broker has access to a wide range of lenders.

Convenience of one bank: Sometimes, if you’re used to having all your banking at one institution, it can feel frustrating to have a mortgage somewhere else. The best product and rate may not fit at the lender that holds your checking account.

Document Process:There may be more documentation involved. The broker doesn’t have access to you checking account like your personal banker would, so more bank statements may be requested.

Should you go with a mortgage broker?

This is a very individual choice, but we like to call it a “free option.” You are never obligated to a mortgage until you actually take the money from the lender. You are able to explore all the rate and product options with the mortgage broker before committing to proceeding. We’d like to think “nothing ventured, nothing gained!”

What are some alternatives to mortgage brokers?

Visiting your existing financial institution for a mortgage sounds like the easiest route. Your accounts & your personal information are already on file. Also, by holding several products with your existing bank, you may be eligible for discounts on mortgage products. On the other hand, it is not likely your current bank will offer you the best mortgage rates available, primarily when you are looking to renew your mortgage. Your provider will automatically send you a renewal slip which is a quick and easy way to get that mortgage renewal; however, the rate will almost always be higher. It’s always a good idea to check in with a mortgage broker and see what other institutions are offering for rates and products.
If you were to find a financial institution you would like to work with, you could quickly contact them. This could be a good option for you if a mortgage provider has an offer that best suits your needs. The problem is, it is still likely you could receive a lower rate somewhere else, mainly through a mortgage broker. Borrowing from a credit union can be an option, but keep in mind that not all credit unions work with mortgage brokers. So, in this case, connecting with them on your own might be the only way to obtain a mortgage from this lender.

Summary

So, what is the best option here? Should you go with your local bank, or should you go with a mortgage broker? Our recommendation is to go with both. In terms of both, we mean getting a quote from your existing financial institution and at least one mortgage broker of your choice. It may sound like a little extra work, but this option will only increase your options and give you the best chance of obtaining the best mortgage product for you, at the very lowest rate, which is the end goal when you’re purchasing a new home!