Even if your IQ is through the roof, mortgages can make your head hurt. It's just plain hard to wrap your brain around what all the terms mean -- points, APR, APY -- not to mention crunching the numbers, shopping around, and filling out reams of paperwork. On the other hand, new products such as Quicken Loans' Rocket Mortgage app claim to make getting a mortgage about as easy as ordering a pizza.
So can you really just go it alone, or do you need reinforcements?
Many people turn to mortgage brokers for help. These professionals act as the intermediary between you and the bank, playing matchmaker for you and your ideal home loan. This sounds great, but brokers aren't for everyone. Here are the top pros and cons to consider.
Pro: Brokers offer up all your options
Many home buyers get their loan straight from a bank, perhaps one where they already have a checking account. Which is fine, but know this: "Lenders only offer their product," says mortgage broker Ken Crichlow of First Rate Funding in Albany, NY. Even Quicken's Rocket Mortgage, for all its speed, offers only Quicken loans, which is a bit narrow to say the least.
Brokers, by contrast, can present you with all your loan options, from a variety of lenders. And since shopping around is key to finding the best deal, odds are a broker will deliver a more ideal loan than one bank or app ever could.
Con: Brokers charge a fee
Landing a loan will cost you -- in fees: appraisal feels, origination fees, application fees. The list goes on and on. Savvy mortgage brokers should be able to get some of those added costs waived. The catch? They may still charge a fee of their own. The broker's fee is paid by either the lender or, in most cases, you -- often 1% to 2% of the total of the loan. Whether it's added to the loan or paid upfront, it can be a hefty chunk of change. So be sure to ask your broker what he charges -- and weigh that against the benefits.
Pro: Brokers can save you time
Yes, you can compare multiple lenders on your own, but that's a time-consuming proposition -- one that brokers can take off your shoulders and manage with ease. They can fill out your paperwork, tell you where to sign, and handle all the negotiations with lenders. What's more, many have relationships with certain banks that enable them to speed up the whole process. So, if you're in a rush or short on time, using a broker is akin to hitting the accelerator and having your own Uber driver combined.
Con: Certain brokers may have biases
While mortgage brokers are independent from banks, that doesn't mean they don't have their biases. For instance, some unscrupulous brokers may have a long history of dealing with certain lenders, and favor them at your expense. Or, in some cases a lender may pay their fee, rather than you. That sounds great -- unless that lender's loan has undesirable terms. So be sure to ask your broker how much he gets paid as well as by whom, so you know the deal.
Pro: You'll get personalized attention
Should you get a fixed or an adjustable interest rate? A 15- or 30-year loan? That will depend on many variables, from your income to your credit score to how long you plan to stay in the home. Brokers can help you weigh your options and find a loan that's right not just for any old home buyer, but you.
"Brokers can look at your specific characteristics and match your application to the best lender given your circumstances," says Crichlow. This can particularly come in handy if you're a less-than-ideal or abnormal candidate.
Are you receiving a large cash gift for the down payment, starting a new job, or making a large purchase? All of these can be hurdles to conquer, and warning signs for a bank, if not handled properly. Or, if you're struggling with poor credit or eager to take advantage of a federal program like FHA or USDA home loans, you might struggle to find a lender that offers those directly to consumers. That's where brokers can step in and pave the way, and continue offering support right on up to the day you close.
So if the very idea of getting a mortgage makes your blood pressure rise, the extra attention could be worth every penny.
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