If you have searched for a mortgage company you will notice there are banks and large mortgage companies, then there are Mortgage Advisors. Is there really much of a difference?
Mortgage Advisors vs Banks
If you have searched for a mortgage company you will notice there are banks and large mortgage companies, then there are Mortgage Advisors. Is there really much of a difference? What are pros and cons of using mortgage Advisors vs banks? We’re going to explain all of the differences of Banks and Mortgage Advisors in this article. As well as the advantages and disadvantages of each time you decide, and which option is right for you. Before you get started, Stephen Kerrigan is a Mortgage Advisor with over 30 years’ experience – this information could help your decision.
What is a mortgage Advisor?
A mortgage Advisor acts as a middle man between the homeowner and the mortgage lender. A broker can prepare your loan application, financial documents, and issue mortgage pre-approvals just like any lender can. A mortgage Advisor works with several mortgage lenders and banks and submits your loan file to them to issue the loan. Advisor get paid commissions from lenders for completing your mortgage application and documents.
Advisors act as the sales force for wholesale lenders. Wholesale lenders send their Advisors rate sheets, which list the rates and prices available for each product. Advisors are often smaller than banks.
A loan with a higher rate may have “rebate” pricing, money which can be used to pay the broker’s commission and perhaps other closing costs on the borrower’s behalf. This rebate is also called a Yield Spread Premium, or YSP.
For loans with lower rates, the borrower pays the broker’s commission, usually about one percent of the loan amount.
Advisors work with a variety of wholesale lenders, which gives them access to many products at many price points.
A Bank or direct mortgage lender is the company that is actually funding the loan. You will work with a loan officer that is an employee of the Bank. Often, Banks are licensed in most. The loan officer only has access to the home loan programs that lender offers. Since you are working directly with the lending company instead of an Advisor, you can usually save some cash on fees.
That isn’t always the case…
Advisors are paid commissions by the mortgage company, some lenders pay more than others. This creates a conflict of interest in some cases. One lender may offer the best deal but pays a small commission. Another loan company may best more expensive for the borrower but pays a much higher commission. Which lender do you think they will choose? When working with a Bank, that loan officer only has access to their own mortgage programs and mortgage rates. You could be getting a better deal with another Bank. Just make sure you always shop around whether you’re using a mortgage Advisor or Bank. You should always speak to at least one other Advisor or lender to compare the loan offers. This way you can ensure you really are getting the best deal on your home loan…. This is how you save money on a mortgage.
Shopping for a Mortgage When shopping for a mortgage loan it’s a good idea to speak to both brokers and direct lenders. Because Mortgage Advisors have access to hundreds of different lenders and types of loan programs. They can shop interest rates for you and help you compare different terms such as fixed-rate mortgage vs. adjustable-rate mortgages, 30 year and 15-year terms, and advise you on other things to tailor a loan that’s perfect for you. If you have imperfect credit then using an Advisor over a direct lender will be to your advantage because there are more programs that you may qualify for.
Pros of Working with Mortgage Advisors
There are several advantages to using an independent Mortgage Advisor over a bank or mortgage banker. Advisors have several lenders they can submit your loan application too. This makes them an attractive option, especially for borrower’s with difficult loans such as low credit scores, or income issues. In these cases, the Advisor has several different lenders that may have lower requirements or programs. This will save you time and money from applying with multiple lenders to find one that can help you.
Cons of working with Banks and direct lenders
Working with the lender directly isn’t without its disadvantages. Most Banks have more rigid loan programs that have higher requirements. If you have a low credit score many local banks and lenders may not be able to help you without a 620-credit score. Because the loan agent doesn’t have multiple companies they can compare, you can’t be sure you are getting the best interest rate on your home loan.
Who should use a mortgage Advisors?
In general, if your loan is a straightforward transaction, and your credit, income and assets are strong, you may be able to save time and money with a bank.
If your application involves challenges, a broker who knows which lenders are most flexible can help. For instance, an Advisor might be best if your FICO is 600 (higher than the minimum for FHA loans), because many lenders impose higher minimums, making it harder to get approved.
A good Advisor would know which lenders don’t apply tougher standards and are more likely to approve your application.
That said, many Advisors today offer competitive pricing in line with that of direct lenders. And many banks today have a larger variety of programs. Look for portfolio lenders if you need something really creative.
To get the best of both worlds, obtain loan quotes from at least one broker and at least one bank when you shop for a mortgage.
What Are Today’s Mortgage Rates?
Today’s mortgage rates from Mortgage Advisors and bankers are highly competitive. To get the best deal on a home loan, experts note that you need at least three or four quotes.
It doesn’t really matter if a lender’s compensation is disclosed on closing documents if you know that you got the best deal available to you. You only find that out by shopping and comparing.