Home loans can be granted to you via several different methods. This can include institutions such as credit unions, lenders, and banks – that are more commonly known as direct lenders or St. Louis mortgage lenders. This allows them to make direct loans to individual people. You can also get a residential mortgage loan from a mortgage broker. A (mortgage) broker is someone that acts as a conduit between yourself and a (mortgage) lender – they are not giving you money themselves, but helping you find the best possible loan that fits your budget and needs. They are there to not only make the process of obtaining a loan simpler but also to help you find different types of lenders to choose from.
Regardless, there are two different ways to receive a loan – either by going through a broker or a lender. Each individual method has its own advantages and disadvantages.
Continue reading to learn about the process of working with a (mortgage) broker and see if that is the right step for you.
Mortgage Broker – What is it?
To put it simply, the purpose of a broker is to work not only with you but also for you with other real estate financiers to find a lender and rate that fits your budget and needs. Your broker can be an independent broker, or they can work out of a brokerage firm.
Whether you choose an individual broker or a broker that works from a brokerage firm, they will perform “comparison shopping” for you – something that is easier, as they will have already established a working relationship with several different lenders. Instead of spending several hours researching the different types of loans you can apply for, the broker will do it all for you, finding the best one that suits your needs.
More than likely, they will also be able to access wholesale mortgage lenders – lenders who will work with brokers, not consumers (you). They will offer wholesale rates, not retail rates – which are lower. This is a great reason to go with a broker, as you will more than likely save money.
For their services, brokers charge broker fees and origination – generally due when you close on your new home. These fees are generally a percentage of your loan, not a separate fee. Also, these fees are usually added to the wholesale rate, not the retail rate.
Remember – a broker is not a loan officer. A loan officer is someone that works for a lender, an institution. They are considered to be an official “go-between” for you and the institution.
Brokers are similar to loan officers, as both are licensed and regulated closely. Not every state requires a broker to be licensed, but most of them do, and the requirements are different for every state.
Mortgage Lender – What is it?
The following institutions are considered to be mortgage lenders – banks, mortgage companies (Quicken Loans, Lending Tree, etc), and credit unions. Each sets its own rates and loans.
Some mortgage lenders contain wholesale and retail divisions – but wholesale divisions only work with brokers, not consumers.
It is a quicker, easier process for you to work with a broker, as different lenders have different qualifying standards and loan options, that you as the consumer would have to research and decide between in order to get the best deal.
Advantages of Brokers vs. Lenders
The biggest advantages of working with a broker are:
-use the broker’s knowledge to find the best loans available
-brokers can comparison shop for you
-a broker can apply for several different loans on your behalf
-a broker can access the wholesale mortgage rate for you
The broker you choose should be thorough and ask you about the following – the type of loan and home you want, what your budget is, and your credit. This is an individualized process that needs many different types of information in order to not only find what you are looking for aesthetically but also the best deal that you can afford.
To meet with a broker, you should have your latest pay stub, bank statement, driver’s license and/or bank stub, your most recent tax return, any recent credit card statements, and any other loan statement that you can think of.
Once your broker has this documentation, they can immediately start working on finding the best rates and the best loan for your budget.
Brokers and (Lower) Credit Scores
If you are someone who has a lower credit score, then working with a broker means that they will be able to help you find lenders that are willing to work with you, despite your credit score. Not only that, but your broker will also know which loans and rates to avoid, and which ones that will help your credit score.
This does not mean that without a broker you won’t find a lender, but it will definitely be an easier process – particularly if you are not having any luck finding a lender yourself.
If you do not know what your credit score is, you can view it here at Credit.com.
Which Should I Use – St. Louis Broker or Lender?
This decision is down to your preferences and needs – if you feel you can (or want to) save time in the process, then use a broker. If you can research the types of loans and rates via each lender on your own, then go directly to a lender.
Always ask your mortgage company if they are a lender or broker – in today’s world, this is not always clear. Also make sure that they are appropriately licensed. You should be able to research the company via the Better Business Bureau, National Association of Mortgage Brokers, Consumer Financial Protection Bureau, NMLS website, and also speak to friends and family about their experiences.
Whichever you choose, make sure to find a lender or broker that you trust, above all.
Finding a Trustworthy Mortgage Professional
To find a lender or broker that you trust, you should first get some referrals from friends and family who have loans. Ask them questions – ask them about how they were treated and their experiences.
Were they treated fairly by the lender? Did the lender make promises that they did not keep regarding their rates? Were there any undisclosed or hidden fees they found out about later? Did the broker or lender respond to questions or problems in an appropriate amount of time?
Check out their loan documents and compare them to see if the Good Faith estimate and the loan document fees match up.
Also – question your broker or lender about their industry experience. It is important for you to be informed about their level of knowledge, integrity, experience, service commitment, and professionalism.
Can your broker provide references? Can they elaborate on their professional experiences as a broker? Can they name some of their top lenders? How long will they take to respond to questions and/or messages? How do they process their fees – upfront or at closing? What makes their services different than other brokers? How much do they make working with a specific lender?
Remember – whether you work with a lender or a broker, you care for the customer and they are there to meet your needs. If they are not meeting your needs, you can always find St. Louis mortgage companies that will.