What Should One Choose: A Mortgage Broker or A Direct Lender

Nowadays, loads of companies and individuals help you realise the biggest financial achievement of your life. These include mortgage brokers and direct lenders.

While their end products are the same, their job description is different. A mortgage broker helps you find the best lender for your financial situation, whereas the bank is the direct lender who decides whether you are qualified for the final loan. In this article, we are going to discuss in detail the difference between direct lenders and mortgage brokers in Brisbane.

Mortgage Broker

When a prospective homeowner is ready for his first big financial venture, he decides to consult a mortgage broker. The latter is someone who negotiates between the homeowner and the lender to provide the best possible loan option to the former. They are not lenders and do not use their funds for mortgage loans. They mostly act as intermediaries and help their clients compare and contrast different options by bringing a variety of quotes at a time.

To do this, a mortgage broker needs a lot of information from their clients to suggest the best possible loan. It’s important to gather documents like income certificates, pay stubs, tax returns, and details on assessments and investment and credit reports. These help them assess how much a consumer can borrow. After gathering all sorts of information, the mortgage broker takes the former to the bank or other institution for loan approval.

A mortgage broker should be able to bring valuable information to the table, such as which lenders offer loans in certain areas, which lenders offer a specific type of mortgage, who welcomes or avoids a specific type of mortgage, who welcomes or avoids applications for certain types of homes such as co-ops, condos, or multi-family homes etc. mortgage brokers also work with those who have a hard time getting their loan approved due to poor credit, bankruptcy, or unsteady employment.

Mortgage brokers are a one-stop-shop for potential homeowners. They save time and effort on loan options and visit lenders to get the best rate. Besides, consumers won’t have multiple hits on their credit reports since they have to visit one lender to get the best loan possible.

Direct Lender

A direct lender is the one who loans the potential homeowners money for a mortgage. It can be banks or other private institutions. Some lenders are private companies that deal only with finalizing mortgage loans for the general public, with many operating online.

 It’s recommended that one go with the lenders with whom they have already done business. Having a long-standing relationship may help secure a better loan amount and an even better interest rate. Applying for a mortgage with a direct lender is quite the same as with mortgage brokers: providing important documents, filling out an application, and waiting for approval.

Let us now look at the differences between a mortgage broker and a direct lender:

  •  A mortgage broker mostly negotiates between borrowers and lenders and mostly acts in favour of the brokers. A bank or financial institution directly approves and finances your mortgage home loans.
  • A mortgage broker does all the job for you, brings you numerous loan options and helps you figure out the best of them. While dealing with a direct lender, there is no need for a middleman, which may speed up the process.
  • A mortgage broker gets paid after the deal is executed. He gets paid by the lender. The direct lender is compensated through a variety of fees.

Connection between a Mortgage Broker and a Direct Lender

There are some instances where the potential homeowners think that they are getting the best interest rate which isn’t always the case. The lenders might offer them the same interest rates as their mortgage brokers. Some institutions don’t like to work with mortgage brokers. If you want to borrow money from that institution, you might have to relinquish the mortgage broker’s help.

As a consumer, no one is obligated to choose between direct lenders and mortgage brokers. One can call up both and compare their rates to decide which path is suitable for them. A mortgage broker is a one-stop shop, and their fees always come from the lender, so it might be convenient for well-qualified buyers to get better fees and rates by cutting out the mediator. On the other hand, the less qualified buyers can go for a mortgage broker since they might be looking for less traditional properties and will always have difficulty getting the bank’s approval.

Also Read About: 10 Questions to Ask Your Mortgage Company