What is a ‘Mortgage / Loan Broker’
A loan/mortgage broker is an intermediary who brings together both the mortgage borrowers and mortgage lenders but does not make use of his / her own funds to originate mortgages. He / She collects paperwork from a borrower and forwards it to the mortgage lender for underwriting and approval. The mortgage funds are lent in the name of the mortgage lender, and the loan broker collects an origination fee from the lender as monetary compensation for his / her services. His / Her position shall not be confused with a mortgage banker, who closes and funds a mortgage with his / her own funds.
Pros and Cons of Availing Service of a Loan Broker
The loan broker operates on the borrower’s behalf to get him the lowest available mortgage rates and/or the best loan programs through numerous lenders. He / She saves the borrower a lot of time during the application process and a potentially large amount of money over the loan life. However, the number of lenders a broker approaches varies by his approval to work with each lender; therefore, a borrower has access to lenders the broker does not.
In contrast, a bank’s loan officer offers programs and mortgage rates from a single bank, reducing the borrower’s ability to compare loans and rates to that on offer by a loan broker.
Some lenders work exclusively with the loan brokers, providing offering borrowers access to loans to which they otherwise don’t have access to. Moreover, brokers get lenders:
- To waive application,
- Appraisal,
- Origination
- And other fees.
Big banks work exclusively with the loan officers and offer no such fee waivers,
In all they loan brokers, act as a middleman, who plays a crucial role in getting borrowers:
- Those loans that they are not able to secure with current credit score or
- Better deals in loans that they are not able to get hands-on themselves, as they are not pro’s in this industry.