Shopping for a new home most likely entails taking out a mortgage. In the process of acquiring homes, buyers usually consult either a mortgage broker or a mortgage lender. These two terms are often used synonymously, but in this article, we will be highlighting their key differences. Being knowledgeable of these differences can assist you in making the right choice when looking for a loan provider.
Mortgage Broker vs Mortgage Lender
What is a mortgage lender?
A mortgage lender is a company that provides home loans. These lenders have a set of guidelines that they use to check if someone can afford to borrow money to buy a house. You can apply for a loan with a mortgage lender directly. The lender will ask you about your income, credit score, debts and the property you want to buy. They will also say how much the loan will cost and when you have to repay it.
Here are some factors to look into when considering a mortgage lender:
- A lender will only provide you with their own mortgage terms and this most likely prioritises their own benefit.
- Homebuyers may be able to get better rates if they have pre-existing business relationships with the lender.
- If a buyer wants multiple rate quotes, it could take more time to find a loan since they will have to provide their information separately to multiple lenders.
- Buyers may not have access to some lenders who exclusively work with mortgage brokers. This may limit their borrowing options.
What is a mortgage broker?
A mortgage broker is a professional who helps people find a lender. The broker will help get you the best deal on a loan. They do not provide the money for the loan, but they do help with getting the documentation you need.
Mortgage brokers will look at your credit report and finances to help you strengthen your application. Once they have all the necessary documents, they will submit them to different lenders for approval. The buyer usually only needs to fill out one application form which will then be sent to multiple lenders.
Mortgage brokers are typically paid through commission, which is a percentage of the loan amount and is paid by the lender. Some brokers may also charge origination fees, although this is not as common.
Here’s what you need to know about working with mortgage brokers:
- Brokers have access to multiple lenders and can help homebuyers find the best deal possible.
- Since brokers are paid through commissions, there is no cost to the homebuyer for using their services.
- Homebuyers may be able to get better rates since brokers shop around for the best deals on their behalf.
- Brokers can provide guidance and assistance throughout the loan application process.
- Brokers work for the homebuyers’ benefit and will provide the most valuable option suited to their needs.
So, what’s the difference between a mortgage lender and a mortgage broker?
A mortgage lender is an establishment that provides home loans directly to buyers while a mortgage broker is a middleman who helps homebuyers find a suitable lender for them. Mortgage lenders typically don’t charge any fees while some brokers may charge origination fees. It’s important to note that not all lenders work with brokers so homebuyers may have limited borrowing options.
Consulting a mortgage broker gives you the advantage of being able to pick from a variety of lenders.
Now that you know the difference between a mortgage lender and a mortgage broker, you can decide which route is best for you when applying for a home loan. If you would like more personalized assistance, working with a broker may be the way to go. Get in touch with our mortgage experts to jumpstart your homebuying journey.