What's the Difference? Mortgage Broker vs. Lender


Mortgage Brokers vs. Mortgage Bankers: What's the Difference?

Benefits of Brokers: Brokers work individually with borrowers. The broker is independent and searches for a loan based on his customer’s needs, not his employer’s needs. A broker matches clients with lenders then walks the paperwork through final approval and funding. Brokers’ fees are paid by the lender, so they are of no consequence to the buyer.

Benefits of Bankers (lender): Mortgage bankers are direct lenders who make the ultimate credit decision; working with them eliminates the middleman. Mortgage bankers themselves approve or reject loans and may prove more expeditious. Mortgage bankers must have substantial net worth if they are to survive. Because they are competing with both other bankers and brokers, mortgage bankers offer competitive rates.

Maximize Your Financing Ability

I had a client who happened to accumulate a 800+ credit score but still cannot impress the lenders for a maximum loan amount. Why? Because he has only one credit card and his consumption mostly was charged to his debit card. Here are a few quick tips for home buyers like you:

1. It helps to have more than one credit card so that your total available credit is high relative to what is borrowed.

2. Clean up your credit report - Some studies say that over 50% of credit reports have errors on them. If something is wrong, you can dispute it. 

3. Reduce your debt-to-income ratio- Showing a solid debt-to-income ratio will set lender’s minds at ease. Pay off credit cards, make arrangements on student loans. Try to pay off large ticket items. 

4. Having a large down payment is a great way to obtain a great rate-Save as much money as you can toward your down payment. You can make a bit of money by putting it away in a CD (certificate of deposit).

5. One of the best ways to get the best price on your home is to have "Proof of Funds". A realtor will likely require a pre-approval letter before showing you a home. You’ll know what you can afford and will be better able to negotiate.

(copyright Bin Ryter)