Mortgage Brokers
What does a mortgage broker do? What are the advantages and disadvantages of using a mortgage broker? More consumers than ever before are choosing to work with mortgage brokers instead going through their local bank or an online lender. Mortgage brokers are middlemen in the loan process. They acquire loan money from lenders, mark it up a little for their trouble, and then sell it to borrowers. Now why would you want to use a middleman if you didn't have to? The best way for me to explain is to use an analogy.
Let's say you want to buy a new computer. You begin shopping around at the major computer manufacturers, such as Compaq. They have a few different models to choose from, but overall the selection is somewhat limited. They don't have all of the different features you need.
So instead you end up going to a retail store such as Best Buy. Best Buy sells Compaq computers too, but they also sell computers from a dozen other manufacturers. Because they have access to many different types of computers, Best Buy is ore likely to have one that fits your specific needs.
Similarly, if you go directly to the lender they will try to sell you one of their products, which may or may not be what you need. But if you go to a mortgage broker who has access to many different lenders and is more familiar with them than you could ever be, you are more likely to find something that suits you. This is especially true for borrowers who are looking for a special arrangement or something other than the standard ARM or fixed rate mortgages.
Another benefit is that a mortgage broker will take care of the paperwork for you. And if you have questions, he will be a lot easier to get a hold of than the loan officer who never returns calls.
But there is a potential downside to using a mortgage broker. There is very little regulation at the state or federal levels, and an unscrupulous broker may give you a raw deal.
Your best bet is to ask your friends and relatives if they know a mortgage broker that they would recommend. Given the increased number of consumers using brokers, it shouldn't be that hard to find a referral.
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