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Welcome to my Real Estate advice column, “Dear Serena,” where I answer all your burning Real Estate questions. Email yours to me at serena@windermere.com and I’ll try to answer them in future columns.
Dear Serena:
What is the difference between a mortgage broker and a lender?
Belinda Buyer
Dear Belinda Buyer,
A lender is an institution like a bank or Credit Union who have specific loan programs and access to funds, a mortgage broker can shop around more for different loan programs and funding sources, so they may be able to get you a slightly better rate.
There are Pro’s and Cons to both.
The Pro’s for working directly with a bank:
- It may be easier, as they already have your financial info so the process may be quicker.
- You may feel like you trust your banking institution more given your relationship with them.
- The interest rate could be lower
- The loan payment method would be more streamline, as you have an account set up already
The Cons:
- Banks are more bureaucratic, so the loan process can actually take longer
- Staff are salaried so may not prioritize you, as they get paid anyway
- Often staff are inexperienced, just customer service professionals
- Banks make mistakes partly because of the above.
- They may overcharge (as the commission does not need to be disclosed)
The Pros of working with a Mortgage Broker:
- You get more loan options because they work with numerous banks and lenders and do all the leg work for you.
- Better customer service, mortgage brokers are paid on commission so are very motivated to make you a priority. They may meet you at your home if that is better for you and will guide you through the process. They usually be way more accessible as they typically do not work 9-5pm. I have a broker who I can call late in the evening if I need help to get my buyer a house.
- They can finance more complicated transactions because of their knowledge and access to various lending partners.
The Cons:
- They may offer you more than they can deliver to get your business
- The can make mistakes too and may lack oversight if it is a small mom and pop brokerage
- May overcharge you (how they make money)
- They may not have access to certain loan programs that a bank may have.
I would suggest you ask your real estate broker for a referral to an experienced mortgage broker or two that they have worked with and compare their rates and fees with your local bank or credit union. Your agent can help you to look at those comparisons.
I do know that in a competitive market it is very important to have a solid, reputable lender whether they be a mortgage broker or a specific lender, that is a known commodity. Listing agents want to make sure that the purchase is going to work out, and having a lending company who is out of state or unknown will not be in your favor. Even if your costs are a little higher than for instance from an online lending institution, you will have a much better chance of winning the house that you want.
