Should you use a Mortgage Broker to finance your home purchase? What is a Mortgage Broker?

When considering where to find the money you’ll need to purchase a home, one commonly used method is to obtain a mortgage with a conventional lender, like a big bank for instance.  It can be a daunting task to secure financing, so here are some recommendations from my own personal experiences through the years. 

Instead of going directly to a lender, i.e., your local bank, credit union, etc., I personally prefer using a mortgage broker to secure mortgage financing.  A mortgage broker essentially ‘shops’ a variety of lenders for the best mortgage for you and your situation.  Mortgage brokers work with many different lenders and therefore have a variety of institutions that they can potentially get you financing with.  The kind of institution and financing they are able to secure for you depends largely on your personal financial situation, including how much debt and income you have, how much money you have available for a downpayment and what your credit score is, along with other variables that affect how risky you will be viewed as a potential borrower. 

I prefer using Mortgage Brokers as opposed to going directly to a lender because of the sheer number of lenders Mortgage Brokers can pull from.  When you go direct to a lender and it doesn’t work out, you have to essentially start from scratch again with another lender. While there may be additional costs to working with a mortgage broker over going direct to a lender, often they can find you better financing with better terms than you could secure on your own, saving you money in the end.

In addition to getting you better terms, they often are able to get you approved when your financial situation doesn’t fit the strict criteria of many conventional lenders.  One such product could be a Portfolio Loan, which tends to be more flexible than a conventional loan.  When a borrower’s situation doesn’t fit the conventional loan mold, sometimes a lender will decide to still make the loan but keep it in-house (i.e., in their Portfolio), instead of selling it to another institution.  Because they keep it in-house, they have more flexibility in setting their own criteria on which loan applications to approve. 

One final thing to consider is that if your financial situation is very good, you have great credit and minimal past credit issues and you also have a W-2 job and you have nothing complicated in your financial situation like owning your own business or past credit problems, if may be just fine to go directly to a local credit union or bank to apply for financing.  I’ve done both and I have to say I personally prefer working with a mortgage broker but you do you!  Whichever way you decide to go, I can honestly say Mortgage Brokers are worth their weight in gold and can often get you loans and terms that you simply couldn’t get without their help.