Searching for the right mortgage can cause a lot of stress, so working with a mortgage broker is a helpful option for anyone who wants to simplify the process. Many home buyers choose to hire a mortgage broker because it’s often the best (and easiest) way to land on the right terms and rates for their needs.
But while working with a skilled and experienced mortgage broker can make all the difference in the world, there are both pros and cons to consider.
Pros
- Access to a variety of mortgage products
There are some lenders who only work with mortgage brokers and therefore rely on them to bring in the clients. In other words, there are some lenders (i.e., for a retail mortgage) which you’d only have access to via a broker. Brokers may also be able to secure lower rates from certain lenders than you’d be able to get on your own.
- Fee management
Buying into a new mortgage or beginning a relationship with a new lender can involve certain fees, such as origination fees, application fees, and appraisal fees. Sometimes, mortgage brokers are able get lenders to waive these fees, which can save you hundreds, or even thousands.
- Reduction of legwork (and stress)
It’s a mortgage broker’s job to be in regular contact with a variety of different lenders. As such, they can introduce you to some you might not know about, and advise you against certain others with questionable payment terms hidden in their contracts.
- Insight into how much mortgage you can afford
Not only can a broker help you assess how large a mortgage you can actually afford, but they can also look over your credit score, DTI ratio, and work history together with the amount of your down payment to determine the likelihood that you’ll be approved. If it seems unlikely, they can then advise you on next steps.
Cons
- Possible fees
Mortgage brokers are paid anywhere between 0.5% to 2.75% of the total loan amount—either by the lender or by you, the borrower. It’s important to figure the fee into your mortgage costs before deciding whether you’re getting a good deal or not. Either way, always settle any and all fee discussions before you begin working with a broker.
- No guaranteed estimates
When your mortgage broker presents you with offers from different lenders, the offers are relatively solid, but not set in stone. In other words, there are cases where the lender might change the terms based on your application, and you could end up paying a higher rate—or additional fees.
- Possible biases
While most buyers are looking for low interest rate and low fees, a broker often gets a fee from the lender for bringing in business, and they may have favorites or special arrangements with certain lenders. Always be sure to vet your mortgage broker first by interviewing at least three, researching their credentials, and reading online reviews.
Bottom line: hiring a mortgage broker is smart if you want to access home loans that aren’t obvious to you; if you’re not finding anything useful on your own; if you have a unique borrowing situation; if your credit score isn’t great; or if you’d simply rather trust a professional. As long as you choose your broker wisely, and ask questions without shame, you’re bound to reap the benefits!
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