Remember when executives or busy parents used to hire personal shoppers so they could save time and hassle? The shoppers would go to multiple stores, buy items, and bring them back to their employers. Hiring a mortgage broker is the home buyer’s equivalent. Here’s why:
What a Loan Broker Does
Just like a personal shopper does not fund the shopping spree but instead uses their employer’s allocated money, a loan broker is not the one providing the funds. He or she is responsible for doing the comparison shopping and finding the loan that meets your specifications. For example, you may be interested in a variable loan or a fixed one. If you do not want to pay the highest interest rate, the broker has multiple entities to contact and compare rates. Unlike you, as an individual buyer, mortgage brokers have established relationships with lending organizations and can leverage those relationships to find more options and very competitive lending terms.
What a Direct Lender Does
What about if you want to shop for yourself? A direct lender on is more like the actual “shop” in the above scenario. Instead of hiring a personal shopper, you would go directly to the store to make the purchase. The direct lender is the one who has the loan, but you get what they provide without deviation. In other words, you take their set interest rate, loan length, payback terms, fine print and more. But going to the direct lender is simple and direct. You can build a relationship and go to the source for information about that loan.
How to Decide Which Type of Lending Relationship is Best for You
Doing the shopping yourself for a loan can be empowering, educational, but also frustrating. You need to go into each bank, credit union or lending entity and sit down with a representative. There will be applications to fill out, wait time and you need to ask the right questions: What does my budget allow me to pay out for a mortgage monthly? Should I take the risk of getting a variable rate mortgage in the current economic climate?
To find out more about how a fixed load versus a variable loan will affect you, you’ll want to do some research. You will need to understand government loans versus conventional loans, and which one is right for you. Learn about types of loans here. Just like employees at a box store, direct lender representatives can only offer you the products and services that they have. Are they representing your interests or their company?
On the other hand, hiring a mortgage broker can have risks too. What if they don’t offer the level of service you expect? What if they don’t have as much experience in helping to provide a particular lending product you are needing?
When deciding on using a direct lender or broker, you also need to be cautious about their representative’s expertise and credentials. Find out how they do business and how long they have been doing it. Make sure that you are working with an organization that offers you a choice in who will be your personal Mortgage Advisor.
What to Do Next When You Decide Between Brokering and Direct Lending
Whether you decide to choose a direct lender or a mortgage broker, do your research. Are they accessible? You might want to start out online to do your pre-hire checking. Look for their reviews online and see what their clients are saying about them. Be leery if they expect payment for services or application fees upfront. Some may want to charge for the credit report fee, which is fine. But know, that both brokers and direct lender representatives typically only get paid when your loan closes. For brokers, most of the time they get paid by the lender when your loan is closed. Their compensation is required to be disclosed to the borrower. With direct lenders, neither you, nor their representatives really know what they are making on your loan, because they don’t have to disclose it.
What if you have an unusual circumstance or need a niche program? You might not know that you can get loans on manufactured homes in Oregon, and we can help. If you are ready to get going on your loan, contact us at Strategic Mortgage Solutions where we have advisors to choose from with the right experience to get the best options.
