10 Pros and Cons of Using A Mortgage Broker

It is common to be excited when starting the home buying process, especially for first-time homeowners. However, that excitement can quickly be taken over by confusion and overwhelm when it comes to sifting through options for the home loan. Part of the issue plaguing potential homeowners is the reality that there are tens of thousands of lenders willing and able to offer a new home loan. One of the solutions to the overwhelming number of lenders revolves around a mortgage broker.

Working as an intermediary between the homebuyer and multiple lenders, a mortgage broker helps borrowers navigate the process of getting a new mortgage from start to finish. Not only do they review financial status and credit history, but they also work through pre-approval processes, help gather the right documentation, and lend a hand with mortgage loan applications. The best mortgage brokers also offer guidance on which mortgage offer is the most suitable. While there are plenty of reasons to work with a mortgage broker, there are just as many that make homeowners avoid them as a resource. Here are the top ten advantages and disadvantages of using a mortgage broker for a new home purchase.

The Pros

1 – Comparison Shopping Made Easy

Mortgage brokers make the necessary task of comparing various lender offers a breeze. They essentially take on the brunt of the work for homebuyers, evaluating options from multiple lenders through a single source. Brokers bring homebuyers several selections based on their lender network and help guide borrowers through the terms of each.

2 – A Single Application

Mortgage applications can be long and cumbersome to complete, but with a broker, homebuyers only fill out a single application, once. The broker then reaches out to the lender network on behalf of the buyer and no additional application forms are required.

3 – Working with Poor Credit

Individuals with less than perfect credit histories or scores may benefit greatly from working with a qualified mortgage broker. Because many mortgage brokers have extensive experience in the industry, they know which lenders are more willing to make an offer to homebuyers who have had a financial misstep or two in the past. This is not often the case when working directly with a single lender.

4 – Personalized Service

Unlike big banks and national financial institutions, mortgage brokers are either individual brokers or part of a small team in most cases. This size difference lends itself to more personalized service throughout the application and closing process.

5 – Possible Reduced Costs

A mortgage broker with a long history with specific lenders may be able to save homeowners on one-time fees. Charges for applications, appraisals, origination fees, and lenders fees may be waived when working with a mortgage broker.

The Cons

1 – You Can Do it Yourself

Homebuyers have, in most cases, the same access as mortgage brokers in terms of finding different lenders and comparing mortgage loan terms. There is no reason to use a mortgage broker if you feel confident you can get the best deal on your own.

2 – A Slower Process

Because the broker does the work for the homebuyer, the total time it takes to get from application to closing can be longer than doing it on one’s own. This is because the mortgage broker shops various rates and terms behind the scenes, and it can take some time to get all the available options back to the homebuyer.

3 – Interests May Not Be Aligned

One of the biggest drawbacks to working with a mortgage broker is feeling less than confident that the individual has the homebuyer’s best interest at heart. Mortgage brokers may be paid finders fees or higher commissions with certain lenders, and less with others, but this can be difficult to ascertain as a homebuyer.

4 – Qualified Help

While there are several advantages to working with a mortgage broker, some homeowners may not know if they are receiving the most qualified help along the way. Unfortunately, some individuals holding themselves out to be qualified brokers are not, meaning they do not have a mortgage broker license or the state-required bond to go with it. Homeowners should take time to search for their mortgage broker on the NMLS database before agreeing to work together.

5 – Paying for Help

Although there are instances where mortgage brokers help save expenses for homebuyers, they do not work for free. Mortgage brokers are paid either on a commission from the lender they suggest or as a percentage-based fee of the total mortgage balance, also paid by the lender. While this is not often a charge paid for out of pocket, it is common for these fees to be rolled into the final mortgage balance owed back to the lender.

Working with a mortgage broker can be advantageous to homebuyers who want help with comparison shopping, paperwork, and finding the best deal on their new home loan. However, it is necessary to check that the broker is qualified, has access to several lenders, and does not charge excessive fees for the assistance provided.