There isn’t a buyer in the world who is happy knowing they could have gotten a lower rate or paid too much on their closing costs. As you look for your dream home, the first step is always securing financing and getting preapproved. How and where you find this is a personal choice but there are more options today than in recent years.
It is no secret that mortgage brokers took a hit when the market collapsed. In some circles, mortgage brokers received a lion’s share of the blame for writing short term adjustable rate loans that were doomed to be an issue down the road. In the wake of the collapse, many mortgage companies folded their doors and mortgage professions ran to other professions. Over the past few years there has been a dramatic increase in the number of mortgage companies and brokers. In fact, nearly half of all transactions last year were done by non-traditional banks. Who you use for your financing is based on several decisions but you should no longer blindly dismiss mortgage brokers based on a few bad apples.
One of the biggest changes in mortgage industry is the educational requirement. Today, every mortgage broker needs to be licensed and go through annual educational classes. If you work with a mortgage broker you can be confident they know everything about the loan they are putting you in. The other major industry change concerns the transparency in fees. The fees and numbers you see at the beginning of the transaction must be within 5% of the final figures. It is no longer possible to get baited and switched at the closing table with a different program or fees than you anticipated. This doesn’t mean you will always get the best deal with a mortgage broker but you can be comfortable knowing you are protected.
The biggest reason to consider a mortgage broker is the diversity of programs. Where your local lender may do a few loans well a mortgage broker has access to many more programs. If there are any issues with your credit profile or application a mortgage broker may have half a dozen or more options where your local bank may be limited. Most mortgage companies work with dozens of lenders that can often fill every conceivable niche for buyers. If you are having trouble getting approved a mortgage broker may have a perfect program for you.
With increased banks, there is a better chance you can find the best rate and terms with a mortgage broker. A local bank has one set of rates and fees whereas a broker has multiple options they can sift through. They also have the ability to change lenders if interest rates take a sudden dip. Additionally, lenders are constantly looking to attract business from mortgage brokers and often have rate and fee incentives. If you have great credit and are putting down a large chunk of money a local bank still may have the best deal but for anything else a broker should be considered.
A final perk of working with a broker is the speed in which they can close. Local banks often have internal red tape that must be dealt with. Mortgage brokers still have hurdles but the lines of communication are often more open. It is not uncommon to close a brokered loan within 30 days. The extra week or so may not seem like much but it could influence a seller to accept your offer.
Who you choose for your loan is based on several personal decisions. There are times when a local bank makes the most sense. Sometimes a mortgage broker will be your best option. Mortgage broker rules, guidelines and regulations have changed dramatically since the market collapse. If you have shied away from using a broker it may be time to give them a chance.