It is often thought that all mortgages are the same. Mortgages do differ between lenders, but they also do differ by lenders. Brokers and loan officers are the two kinds of real estate originators.
The way brokers operate is by securing a real estate loan for you. They are mostly self-employed and the amount they get paid depends on the total transaction amount. The mortgage loaners that advertise on the Internet are usually brokers.
Loan officers are not self-employed. They sell loans only for their employers. They could be employees of banks, credit unions, or other financial institutions. Loan officers generally restrict their activity to a certain physical location.
There are various positives and negatives while dealing with both brokers as well as lenders. Here is an indication of them.
Working with brokers
The one major plus point with brokers is that the bigger the loan amount they get for you, the better for them because they get paid according to the amount been offered to the buyer. It often happens that those who have been rejected for a loan by a particular financial institution also happen to find loans through a mortgage broker though it must be kept in mind that these loans would have a higher interest rate. It is definitely a good idea to consider a broker if your real estate is unique or is a commercial property.
There are a few disadvantages of using a broker to find a loan. Real estate brokers are usually not in the city or town that your property is in. Owing to this, they may not have sound knowledge of the market conditions in your area. This could lead to complications since it is extremely important to understand the various terms and conditions regarding real estate in a particular area when shopping for a loan. Another negative is that your mortgage loan will be sold to another lender immediately after closing. A loan secured through a broker would usually have a higher interest rate and a higher risk quotient. This is because brokers tend to deal in only conforming or non-conforming loans. Brokers are not regulated by the fair credit act.
Working with loan officers
Although loan officers would only be able to offer you loans from the particular institution they work for, they would be able to put more kinds of loans on the table for you to choose from. Usually being in a closed physical location, they understand the market conditions of the given place and work accordingly.
Banks and mortgage companies
One great advantage of a bank is that it would give you face-to-face service. Some banks only sell those mortgages that are low-end or those, which require a lot of servicing with low returns. Some banks make it appear as though your mortgage continues to be owned by the bank, by selling you the loan and keeping the service portion. It is highly recommended that you ask the bank before hand whether your mortgage may be sold.
Banks and other mortgage companies are licensed and are required to meet certain criteria. It gives the buyer a sense of comfort. On the flipside though, buyers are also expected to meet certain eligibility requirements. They are often not granted loans because they don’t meet these requirements. Financial institutions generally do offer better interest rates. Unlike brokers, they are also required to give you an estimate on closing costs and are regulated by the Fair Credit Act.
Credit Unions
The advantages of approaching a credit union for your real estate loan is that you get charged only the actual cost of the loan. So no brokerage fee or commission to be paid to anybody. Also, their loans are never sold on the secondary market and you, as a customer, continue to get good service even after closing. Remember though, you must be a member of the credit card union to get a loan from them.
Taking a decision
It is absolutely essential that you shop around rigorously for you real estate loan. Get all the necessary information by asking a lot of questions to all prospective sellers. Start looking at your loan options even before your real estate options! Ask your real estate broker to put you on to someone good. After you have contacted all your options, compare all the rates and see which one works best for you. Try getting a pre approved loan if you are buying a residential property.
A good mortgage loan can save you more than you can sometimes imagine, so do make sure to spend as much time as possible on shopping for a good loan.
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