Why use a mortgage broker?
One reason is the wide variety of programs available to a mortgage broker due to their ability to originate mortgages for multiple banks. Your local bank may have a handful of available programs and a mortgage broker will have literally hundreds of options.
In the past, banks and other lending institutions have distributed their own products. But, as markets for mortgages have become more competitive, the role of the mortgage broker has become more popular.
One of the least talked about advantages of utilizing a mortgage broker is the substantially reduced impact to your credit score when working with a mortgage broker vs. independently shopping around with multiple direct lenders. While independent lenders will each pull your credit report, resulting in potentially dozens of damaging inquiries to your report, a competent mortgage broker is able to price your loan with hundreds of wholesale lenders with as little as 1 credit inquiry. The difference can be astounding, in some cases saving borrowers as much as 100 points on their credit score.
A good mortgage broker will give you a better rate than the bank. The closing costs may be a little higher, but if you're getting the loan for the long run, it is more cost effective to go with the broker and the lower rate/higher closing cost.
Using a honest and competent Mortgage Broker can save you money and provide you with many different loan options. A competent Mortgage Broker will shop around to get you the best rates at the lowest costs. Plus, Mortgage brokers are able to help borrowers with unique financial situations or circumstances because of the hundreds of loan programs available to them.
Although closing costs may be a bit higher this is not always the case. For example, a mortgage broker may be able to provide you with the same rate that the bank is providing but the mortgage broker may be able to charge zero points whereas the bank may be requiring one point.
Keep in mind that a mortgage broker is a financial professional who makes a career of matching his clients with the best possible mortgage. He is not just an employee of a company trying to sell that company's products.
The flexibility of a mortgage broker cannot be matched by a local bank on any level. If your mortgage approval come into question a mortgage broker can change lenders in a matter of minutes. Your local bank does not have that ability.
Mortgage brokers will usually get the wholesale rates from most of the lenders that they use. What does this mean to you? This means that by using a mortgage broker, most of the time you are going to be able to get a lower rate because the mortgage broker is able to offer wholesale rates versus the banks retail rates. Basically, another way to look at this, is that it is like going to a shopping outlet store and getting the wholesale prices (mortgage broker) or like shopping at a name brand store and paying the marked up retail price (banks).