When looking for the “right lender” for your mortgage loan - for the first time or not - you’re laser focused on three things:
- Finding the lowest rate and closing costs available.
- Having an easy process - with zero bumps and surprises.
- Working with someone you trust - who’s reliable + knowledgeable.
But what most people their time and energy shopping for is #1, the lowest rate and closing costs. When they find the answer to #1, they just hope it will come with #2 and 3. Literally, fingers crossed.
What if there was a way to ensure you find all three when it’s time for you to get a mortgage? We think you can and here’s how.
Working With a Mortgage Broker
The typical loan shopper journey starts out just like that - shopping for rates. It takes time and dedicated effort to call lender after lender, checking interest rates. You’ll need a spreadsheet just to keep track of the collection of numbers.
After finally finding a bank with the right combination of low rates, closing costs, and customer service - you’re ready to move forward. You feel pretty good with this killer rate you scored and can’t wait to tell your friends.
Suddenly, in the middle of the loan process, you learn that the lender has a minimum allowable credit score that’s 20 points higher than yours.
Or maybe you learn that your debt-to-income ratio is just one percent higher than the bank will allow - and they won’t budge. What now???? This wasn’t part of your search process because how were you supposed to know it was important to ask those questions?
If you’re working with a mortgage broker, you have no need to panic. Brokers have access to a complete portfolio of lenders and rates. And, before choosing the right lender for you, they’ll assess the risks you might present to a lender.
Because every borrower has a “risk profile” that both impacts the interest rate they get and must be matched with a lenders’ underwriting guidelines. (To read more about this subject check out this article.)
Knowing your risk profile is important because certain banks have a larger appetite for certain types of loans or levels of risk. And some lenders are more flexible with different income types or asset usage. Knowing these details allows the broker to find the right home for your loan.
What About Price and An Easy Process?
No matter what your risk profile looks like, you deserve the lowest interest rate. You might believe that working with a “middle man” in the loan process will cost more. However, it doesn’t cost more because a mortgage broker isn’t a “middle man.”
To explain this, you need to understand that banks are in the business of making mortgage loans - as many as possible. They employ loan officers to generate loan applications, but they also accept loans from mortgage brokers to increase the number of loans they make.
They view mortgage brokers’ as another source of loan applications. So, their rates and fees aren’t impacted by where the loans come from - employee loan officer or mortgage broker.
And banks realize mortgage brokers have many lenders to choose from to find the best home for their clients loan. So, they treat brokers as their customer - one they strive to please in order to earn their business.
Brokers are always assessing a lender's performance along with their rates. If multiple lenders have virtually the same rates, fees, and underwriting guidelines - they’ll choose the lender with great customer service and fast turnaround time.
Mortgage brokers can assess this because of their experiences working with a volume of clients’ loans. They constantly analyze a lender’s results and their future clients benefit from this first hand experience.
Does It Take Longer Working With a Mortgage Broker?
The short answer is no. On top of brokers paying attention to the quality of service a bank provides, they also have one more positive feature up their sleeve: their own staff of processors.
A processor is the individual who manages the loan file once it’s received. Processor’s work closely with Loan Officers to assemble all the paperwork that must be in the file before it reaches the underwriter for loan approval.
Many banks centralized their processing staff, keeping loan officers at arm's length from the processor. But this interrupts critical communication and that can delay a loan. Missing information can set a loan file back for days - and that leads to loans closing late.
Brokers keep the borrower (you), loan officer, and processor communicating so fewer details fall through the cracks.
The brokers’ processors work closely with the lenders' underwriters. Overtime, their experience helps them to anticipate potential requests for additional information from an underwriter. And this can turn out to be a critical timesaver as the loan file moves through the process.
What If Something Goes Wrong?
If you’re worried that not working directly with a lender means your loan will be treated differently by their underwriters - stop. Loans aren’t given preferential treatment based on where they originated. The same underwriting guidelines are applied to every loan - and that’s actually a Federal law.
But unexpected issues can happen and that’s when working with a broker turns out to be the best decision you made. The brokers’ multiple lender relationships gives them flexibility - and they can quickly pivot. The loan file can even be submitted to another lender, if necessary.
At the start of your mortgage journey, you have no idea if major issues will come up while your loan is in process. Working with a mortgage broker provides free insurance - just in case, without sacrificing low interest rates.
Mortgage brokers never know if they’ll need to pivot to rescue a loan, but they know they have the ability to do so. It’s like driving on a 4 lane freeway vs a 2 lane highway - options allow you to move along smoothly no matter what might come up. Why not have them?
Everything And The Best Price
You’ll gain many things along with low interest rates when working with a mortgage broker:
- The best aspects of working with a small business versus a large company.
- A feeling of community and an ease of communication.
- The benefit of the personal touch and responsiveness found working with brokers.
At Point Equity, we see you as a part of our family. And we make sure our family gets the best rate with the least amount of stress. So you’ll be smiling when you get the keys to your new home.