Just as some people hire personal shoppers to handle their grocery or clothing purchases, some people might decide to work with a mortgage broker when it’s time to buy a home or refinance a loan. While a mortgage lender loans you the money directly, a broker acts as the intermediary between you and the lender.
Mortgage brokers can be very helpful when shopping for a mortgage, but, just like personal shoppers, their advice comes at a price. For one thing, you have to pay for the services of a mortgage broker, either up front or in the form of points added to your mortgage.
Unscrupulous brokers also played a part in the housing crisis, from which areas such as Atlanta are still working to recover. Some mortgage brokers were willing to pair people with mortgages they couldn’t afford or weren’t qualified for. This lead to the passing of laws such as the SAFE Mortgage Licensing Act. According to the U.S. Department of Housing and Urban Development, this act creates rules for licensing brokers and aims to protect the public. If you are trying to decide whether to work with a mortgage broker or to work directly with a lender, there are a number of things to consider.
Variety
Part of the appeal of working with a mortgage broker is that he might be able to show you more mortgage options than you could find on your own or that you would find working with a single mortgage lender. A mortgage broker might be able to direct you to specific loans that make the most sense for you based on your credit history or financial status. Working with a broker may also increase your chances of prequalifying for a mortgage, although you can certainly prequalify with a mortgage lender on your own.
But, in the aftermath of the housing crisis, the landscape for mortgages isn’t as varied as it was once, according to the New York Times. It’s likely that mortgage lenders will have a more similar products to each other, meaning you most likely don’t need the services of a mortgage broker to open up a range of mortgage options to you.
Contact and Connection
A mortgage broker might be helpful in the process of finding a bank or mortgage lender. Once you have your mortgage, however, the broker won’t be there to act as your go-between anymore. The loan will most likely be sold to a servicer who will take your payments every month. With no previous direct contact or connection to your sevicer, it can difficult to forge a relationship with them or to figure out whom you should contact if you have an issue with your loan.
Working directly with a mortgage lender can often be the better option for that reason. You’ll establish a relationship with the lender from the start. If you have a question at any point during the process, or if you want to refinance your loan at a later date, you’ll know exactly whom you should call.
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