Should You Hire a Mortgage Broker or Do It Yourself?
When you’re ready to buy a home, you may wonder if you should try to shop for a mortgage on your own or reach out to mortgage broker for help. A mortgage broker can be very helpful in the process, especially for people who are inexperienced in buying a home. Here’s everything you need to know about the pros and cons of using a mortgage broker.
How Easy Is It To Shop and Secure a Mortgage on Your Own?
If you’ve never shopped for a mortgage before, you might be wondering if it’s a task you should tackle on your own.
“In today’s modern age, shopping for and securing a mortgage is easy to do online,” said Kevin Leibowitz, a mortgage broker with Grayton Mortgage. “There are number of online lenders that help facilitate this easily. But, sometimes those lenders might not offer the best terms (i.e.combination of closing cost and rate).”
Leibowitz went on to say that he finds that most individuals who are shopping for a mortgage need help determining what is best in their situation, which is something a mortgage broker can help with. “A home is the most expensive item they will ever purchase, and buyers would like to be comforted in the process as well as having their understanding validated and perhaps corrected,” he said.
Khari Washington, broker and owner of 1st United Realty & Mortgage, is in agreement that it can be easy to shop for a mortgage on your own, but you need to have some knowledge when doing so.
“Shopping for a mortgage is easy if your income is easy to verify, your credit is good and you know how to weed through how closing costs are structured,” he said. “Borrowers need to know how many points they are paying for a rate so that they don’t take a lower rate at a higher price, making the rate more expensive than a competitor with a higher rate.”
What Are the Advantages of Working With a Mortgage Broker?
One advantage of working with a mortgage broker is that you may be able to save money.
“Working with a mortgage broker may result in a reduction of the lender’s standard fees,” said Shad Elia, CEO of New England Home Buyers. “Borrowers may incur lower funding or origination fees as a result of the loan provider’s assessment. This is not always the case, though. When working with a broker, it is critical to request a fee breakdown.
Another advantage is that you may reduce the amount of paperwork you would potentially have to complete.
“Homebuyers who take the time to look around for the best mortgage often find themselves confronted with mountains of paperwork to complete,” said Elia. “Those who deal with a mortgage broker, on the other hand, will only need to submit one application for a new loan, rather than filling out multiple applications and providing multiple copies of financial statements to various lenders.”
“A mortgage broker will be able to shop a loan correctly, looking at the actual cost of the rate and finding the truly cheapest provider they work with,” said Washington. “Also, mortgage brokers have lenders that can help with financing borrowers with issues. Mortgage brokers are usually a little faster at getting loans funded as well.”
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What Are the Disadvantages of Working With a Mortgage Broker?
While probably not a dealbreaker for most people, Jeffrey Loyd, principal at Mortgage Acuity pointed out the following: “It’s unlikely you will have your mortgage at the same bank where your checking and savings account is.”
And Leibowitz pointed out a couple of other disadvantages.
“The main disadvantage is that mortgage brokers might not be as competitive on a few types of products,” said Leibowitz. “Namely, jumbo mortgages and interest-only mortgages. These are called better bank products. Additionally, since a mortgage broker is not a depository, we cannot offer a rate benefit for bringing in deposits. For example, a bank might be able to cut the rate if the borrower is able to bring $X in deposits.”
Who Should Consider Working With a Mortgage Broker?
“All home borrowers should work with a mortgage broker, as there is nothing to lose and much to gain,” said Ross Taylor, mortgage broker and owner of Ross Taylor Mortgages. “In particular, there are certain borrowers who would not be approved at their bank, and they need access to mortgage lenders who are not necessarily banks. In such cases, working with a mortgage broker is essential to being approved. These might be borrowers with damaged credit or income that is hard to verify.”
“A mortgage broker is best for those who want more time with their loan officer getting their questions answered and their concerns addressed — first time homebuyers, homebuyers with less than 20% down payment, self-employed persons or persons with complexities in their income sources, and real estate investors — are all great clients for mortgage brokers,” said Loyd.
“I find most borrowers do better working with a mortgage broker,” said Washington. “Different mortgage brokers are better with various loan programs, and brokers seem to work faster, have fewer overlaying requirements and lower rates.”
However, if you have excellent credit, prefer to have your mortgage loan at the same institution where you do your banking and believe you can get your bank’s best rate, follow Taylor’s advice, “If you feel your bank of many years is where your mortgage belongs, first ask them for their best mortgage offer. Then ask your mortgage broker if she [or he] can do better. Most of the time, the answer is yes!”
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