When shopping for a mortgage, it is important to always look at all available options. When your realtor recommends you use your preferred bank for your loan, get a second opinion to understand the advantages of using brokers vs. lenders.
Working with a direct lender is like shopping for a car. When you go into a Honda dealership, you’re only going to get a Honda, right? Now, working with a broker more like going into CarMax where you can get a Honda. Or a Ford. Or a BMW. Since brokers have access to many different banks, they have many more options and solutions to choose from which allows us to serve more customers with more products.
Brokers get “wholesale” pricing from lenders which usually means we have access to lower rates. Since the banks don’t have to pay us until the loan closes, they are able to keep their costs super low. On the other hand, lenders often have large offices, multiple branches and tons of overhead that they must keep up with regardless of whether they close 1 or 100 loans. Wholesale pricing allows brokers to offer lower rates. Because brokers do not have in-house underwriters, they also are able to waive unnecessary costs like underwriting fees.
Lenders have a finite capacity which can affect their turn times. For instance, if a lender is swamped with business, and they have many customers trying to close at the same time, that can cause a capacity issue. Since brokers have access to many different lenders, it allows them to find a lender that does not have those issues thus allowing them to close loans more quickly when business gets busy.
Finally, brokers are often smaller, so they can have a more customer-centric approach to the mortgage process. A large bank has other responsibilities like banking, car loans, personal loans, etc, so there are a lot more customers to service. Brokers also have more stringent licensing and educational requirements by the state and federal government which results in a better educated loan officer. With that said, brokers will diligently work for their customers to find the best deal in a timely, if not quicker, manner.
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