If you are looking for a home and have found the perfect place, your next step is to secure a mortgage. For many people this is the stressful part. You must verify your income, review your creditworthiness report and prove that you are a worthy borrower. Then the next step is to find out where to get a mortgage. You have two options for finding a mortgage for your future home: mortgage brokers and direct money lenders. There are different differences between the two. Read below for more information on determining the best fit.
A direct lender is someone who can offer a mortgage, including commercial banks that offer a whole range of services and mortgage banks. If you choose to find a mortgage through direct lenders instead of mortgage brokers, you must apply for this separately for each lender. This can make the process too time-consuming for some busy customers. Nowadays there is little variation between the rates and conditions, so it may seem like a hassle to consult many lenders. But even a difference of 1% can make a huge difference in the life of your loan. (For more information, see: 5 secrets that you did not know about mortgages
One of the advantages of direct lenders is that it is easier to solve problems that can occur immediately. Your broker may not be able to answer any questions from the lender, so you can get better results if you talk directly to a lender. Going through a direct lender can also be faster than using a broker. If you have multiple accounts with the same bank, they may offer the best rates to be a loyal and valuable customer. (For more information, see: How interest rates work on a mortgage .)
The main advantage of a mortgage broker is that they can get different offers from different lenders and present them to you. Instead of applying separately to each lender, you only have to speak to one mortgage broker to see what your options are. (For more information, see: How to get the best mortgage rates .)
People had a negative view on mortgage brokers because they were loosely regulated and were therefore known as tempting borrowers to make a high choice-risk mortgages. Now that more protections have been set up, they are a good alternative if you do not want to use a direct lender. You can still use a number of mortgage brokers to ensure that they have done their due diligence. They earn money when you choose a mortgage, so do not be fooled that they only represent your own interests.
Borrowers who use such mortgage brokers can solve potential problems before they go to a bank. The broker can also let them know what their options can be before the lender does so to ensure that their expectations are in line with reality. Mortgage brokers receive a final payment based on the mortgage. If you do not want to pay that compensation, you must find a lender who is willing to pay the mortgage broker’s fee. (For more information, see: How to choose the right online mortgage lender .)
The bottom line
You do not have to choose between mortgage brokers and direct lenders. You can get quotes from both to see what is available to you. If you call both mortgage brokers and direct lenders to compare their rates, you can more honestly assess which route you want to go. If you get a recommendation for a mortgage broker and do not want the hassle of contacting different banks, a broker may be the better option. If you already have a bank with which you have a good relationship, they may be able to give you a better mortgage.