The term broker is often overused. Technically a residential mortgage broker is a liaison between a borrower and a bank. However in lending, it is most thought that a residential mortgage lender would be loaning their own money. Meaning that if I were to work for one company, I would put all of my loans through that company, therefore I would not be brokering the loans to an alternative source. A mortgage broker, typically, does not loan their own money, and uses multiple banks to fund their borrowers loans.
Now for the pros and cons…
If your loan officer works for a good lender, which is referred to as a direct lender, or bank, then it can help make the process of the loan extremely efficient because the direct lender or the bank, control all of the decisions and the money. They determine their turn times, they determine their tolerances for guidelines, they hire their operations staff…..you see where I’m going with this? Now, just because they have the ability to have all of this control, doesn’t mean that they’re good at it!
With a loan officer who brokers a loan, this can be beneficial if a direct lender doesn’t offer a particular product, or when searching for different tolerances with guideline restrictions, or even if a client is super rate sensitive. However, my experience on a whole, is that brokering a loan is like going to Disneyland during peak hours. You have to get in line for the rides, with everyone else. There is no putting your files first because of an urgency. There is no control over turn times, efficiency, competence levels of the employees. Again, a direct lender may not have efficiency as their middle name either, but what’s important is to ask around to find out what loan officer is properly connected to the right bank.
If you must broker a loan, that doesn’t mean you WILL get poor service or higher rates. It just means that you’re taking a bigger risk to close your deal because there is no way that a loan officer could know all of the investor overlays (extra conditions needed at each lender they broker to) to avoid delays, or requests, or worst case scenario, declined!
I’d be happy to go over this more with you one on one. For more information on this topic please watch the short video below or feel free to reach out and connect!