How do you find the best deal on a mortgage, knowing that even a small difference in interest rate or rules can mean a significant amount of money saved? Should you go to a mortgage broker or bank to find it?
Let’s first look at what brokers do. A mortgage broker is a middleman who works to find you the best deal and then facilitates that deal for you. At first, you might assume that having a middleman might increase expenses (after all, he or she has to make a profit, right?). However, an important thing to consider is that just like an insurance broker or a stock broker, a mortgage broker has relationships with lenders that allow him or her to attain “insider” deals that might not otherwise be available to consumers who approach banks without a broker.
Additionally, the numbers show time and time again that wholesale mortgage brokers are able to obtain better deals for loans because the broker does all the work that the lender would otherwise have to do. This includes the processes of origination, qualification, submission of paperwork and closing. This is why Zillow shows that using a mortgage broker can save homebuyers anywhere from a quarter of a percentage point to half of a percentage point from the onset of the loan.
Finally, the biggest reason why a mortgage broker can find you a better deal is because they have a wide range of options to choose from. However, lenders will only offer you packages from their own programs, which could limit the amount of money you save. If you go to a direct lender, they will try to fit you into one of their loans; whereas, the brokers will look at what you need and find the right fit for you by looking at the loan offerings of multiple lenders.
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