So you’ve decided it’s time to buy a new home! If you’re like most Americans, you’ll be making your purchase using lender’s money, paid for on your behalf, that you must pay back over the length of the loan – a mortgage note. Whether you’re married or single, financing the purchase of your home is one of the central steps in the purchasing process.
Now, there are many ways to finance a mortgage: you could secure a loan through third-party intermediaries, like LendingTree.com, or by dealing directly with a bank that you have a business or personal relationship with.
However, websites like LendingTree.com use your precious personal financial data like social security number and credit history, and share it freely among untold numbers of potential lending entities. It’s a bit of a “free for all” that many would-be borrowers are rightly uncomfortable with.
Financing through a traditional credit union or Big Bank has it’s limitations, too. The interest rates are not competitive, and your creditworthiness must be superb to qualify. In addition, Big Banks are large and clumsy, resulting in an often long and cumbersome approval process.
There’s a better way to locate a lender for your home purchase: work with a mortgage broker.
What do mortgage brokers do, exactly?
Mortgage brokers make their living as a conduit between dozens of potential lenders, and a potential borrower. A mortgage broker has the distinct ability to work with lenders on a large volume basis, allowing him to secure lower interest rates. A good, experienced mortgage broker has a network of lenders at the ready to lend to his clients. It’s the mortgage broker’s job to choose the right lender for you, the borrower, based on your overall financial wellness or goals.
A good mortgage broker will also guide you along the process, much like our Realtors do for our clients. He is a human being who is there when you need advice and guidance. He is your one-stop shop. A mortgage broker will tell you to hold off on that car purchase you were planning, because he knows by how much it will overextend your credit. He may also tell you to go ahead, make that purchase! He knows your overall financial picture, and knows what will and will not complicate your upcoming home purchase.
Mortgage brokers help solve problems that arise in the lending process
A real estate transaction is an extremely complicated process, because there’s a lot that can go wrong. Of the major phases of a home purchase – from the contract to purchase, to the inspections, to lending, title, and closing – the phase that is most prone to unsurmountable and deal-killing complications is the lending phase. There’s just too much that can go wrong, and if you don’t have someone in the middle mitigating and advocating on your behalf, you could end up losing both money and your new home.
Here’s an example of what we mean. Imagine that you are financing through a traditional bank. The person with whom you will be working with is a representative at the local branch. That person works for that bank only. She offers you a pre-qual letter, meaning a soft commitment to your loan based simply on your credit score. So you find an amazing home, and your offer is accepted. The ball starts rolling with the lender, but then, suddenly, the lender has discovered something about you that spooks them. Or, as it is the case more often, the lender discovers something that is out of their control, like an initial over-estimation of how much loan you could afford. Now, you’re told, they cannot close on the loan.
How are you going to convince the representative at that bank to change her mind? The answer is that you won’t.
Now imagine that you are working with a mortgage broker. Mortgage brokers go a step further than a pre-qual letter from the beginning. They like to secure a pre-approval for a loan up to a certain amount. That means you have a hard figure – say $275,000 – that the mortgage broker knows he can get you financed for. If those issues described above come up, no problem – a mortgage broker could convince the lender of your creditworthiness to save the purchase, or source a new lender.
A Realtor’s recommendation: use a mortgage broker
At Copeland & Co., our Realtors always, always, always recommend using a mortgage broker for your home purchase. Why? In our 15 years’ experience in helping people buy homes, most of the issues that can arise in the lending process do. Big Banks have little incentive to solve whatever problems come up, because there are hundreds of other borrowers across the country waiting in line without problems.
Mortgage brokers are the answer. A mortgage broker is a real, live human who works for you to secure a lower interest rate, to guide you through the home financing process, and to address potential issues quickly and efficiently. The combination of working with a seasoned Realtor, and a reputable mortgage broker is a power team that will help you get your home, and the right price, without worry or anxiety that you are doing something wrong, or could have done something better.
In short, leave it to the professionals. Hire a Realtor, and work with a mortgage broker.