Why Use a Mortgage Broker Instead of a Bank When Purchasing a Home?
According to the Washington Post, mortgage lenders turn down one in eight applicants for loans. Are you afraid you might get turned down when you apply?
Many people turn to banks when they need mortgage loans to buy homes, but people with less-than-perfect credit might benefit by applying through a brokerage firm instead of a bank.
Are you asking, “why use a mortgage broker instead of a bank?” If so, continue reading this article to discover why people turn to brokers instead of banks when they want to buy homes.
A Broker Has Connections
Before you can understand why people use mortgage brokers instead of banks, it might be helpful to start with a definition of each. It might also help to understand the products each option offers.
A bank is an institution that offers many services, including mortgage loans. When a bank issues a mortgage loan to a person, it loans the money to the person. A person can apply for a mortgage by visiting a bank and filling out an application.
So, what is a mortgage broker? A mortgage broker is not someone who works for a bank or a lending institution. Instead, a broker is an independent business that works with mortgage lenders and people who need mortgages.
Therefore, a broker is a middleman or third-party. A person that wants a loan through a broker can visit the broker and apply for a loan. The broker does not issue the loan or approve it. Instead, the broker finds a lender willing to approve it.
The first benefit of using a broker is that they have connections, whereas banks don’t. When you get a loan from the bank, you must meet the bank’s eligibility requirements. If you don’t, you will not get the loan.
On the other hand, a broker works with many lenders. The lenders are the broker’s connections. As a result, you’ll have the opportunity to apply for a loan with many lenders, increasing your chances of getting approved.
Brokers Offer Advice and Suggestions
The second reason people seek loans through brokers is for the advice and suggestions they offer. Brokers take the time to review a person’s finances to learn the situation.
After doing this, a broker can make suggestions and offer advice to the applicant. This advice helps the person properly prepare for a loan and increases the person’s chances of finding a lender.
Many people seek help from brokers when they have derogatory items on their credit reports or from the past. A broker can look at this information and recommend steps.
If the person completes the steps, they might be able to increase their credit score enough to qualify for better terms. A bank doesn’t offer this service. A bank will either approve an application or reject it.
There is no advice or assistance for the person when using a bank. People with spotless, perfect credit histories might not need advice, whereas people with jaded credit might.
Brokers Work With All Kinds of Financial Situations
Another key difference between a bank and a broker is the eligibility requirements they follow. Banks have set procedures, guidelines, and requirements in place. If an applicant doesn’t meet all of these, the bank will reject the loan.
Because a broker works with many lenders, brokers do not follow one set of eligibility requirements. Instead, they shop around for lenders that may have more relaxed requirements if necessary.
If a person has a bankruptcy in the past, for example, he or she will have a better chance of getting approved for a loan through a broker than with a bank. The broker will know which lenders work with people that filed bankruptcy in the past.
The best part about working with these mortgage brokers is that they can often find a loan for anyone. While the person might need to complete a few steps before getting the loan, the person will most likely qualify for a loan afterward.
Brokers aim to help everyone get loans if they want them, which is one of the top reasons you should seek your loan through a broker. Brokers aim to find loans because of the way they get paid.
How does a mortgage broker get paid? The lenders that issue loans through the broker pay the brokers a commission for each loan. Therefore, brokers have an incentive to work hard to find loans for anyone that wants one.
They Offer Competitive Products
The final thing to understand is that you can get a better loan through a broker than through a bank. A bank has just one loan type to offer. The loan comes with the terms the bank chooses, and there are no options.
When you work with a broker, you have options. Your broker will find several loans that you are eligible for based on your financial picture. The broker shares this information with you, and you get to choose the loan you want.
Each loan offer will come from a different lender, and each will have different terms. You can compare the options before choosing the best one. If you aren’t sure which to choose, ask your broker.
Your broker will explain your options to you and help you compare the pros and cons of each. He or she might also help you determine which is the best one for your situation.
After getting your loan, you can always go back to the broker to refinance it if you wish, as brokers also help with refinance loans. These are just a few reasons people prefer brokers over banks, but there are also many other reasons.
Why Use a Mortgage Broker Instead of a Bank? For the Benefits!
As you ask, “why use a mortgage broker instead of a bank,” you’ll hopefully understand the answer. People choose brokers for the benefits they offer.
If you enjoyed reading this blog and would like more information about mortgage loans, look at the rest of our blog.