Mortgage lenders and brokers each play a key role in the home loan process. Both help borrowers obtain mortgage financing, but each offers distinct benefits.
For borrowers who might struggle to qualify for a mortgage due to low credit scores or sparse credit files, a broker can connect them with lenders that are more flexible in these situations.
1. Access to a Diverse Lender Portfolio
Mortgage brokers often have access to a number of loan product options that can help homebuyers get into their dream homes. This optionality is particularly important as today’s shifting demographics of homebuyers continue to seek mortgage solutions that suit their unique circumstances.
While most of Einhorn’s borrowers fall within conventional parameters, he maintains his broker status to provide them with the option to work with a lender that can fit their unique situations or needs. For example, if someone has excellent credit but is self-employed or owns their own business, they may not find a lending solution through a direct lender.
For Einhorn, maintaining relationships with a wide variety of lenders is also essential because the market can change quickly. For instance, during the height of COVID-19 in 2020, Einhorn noticed a number of his lender partners raising their rates significantly. This was due to an influx of new business and competition. Working with multiple lenders enabled him to move his clients to a different lender before prices increased.
2. Enhanced Options for Clients
Mortgages are the largest and most costly loans borrowers take out, so it’s important to shop around for the best deals. A broker can help a borrower compare loan options to ensure they’re getting the right product for their circumstances and needs.
A mortgage broker can provide a more personalized experience than a bank. For example, if a borrower has bruised credit or unique borrowing circumstances, a broker can connect them to lenders that are amenable to these situations. They can also offer more niche mortgage products, such as jumbo loans, non-QM mortgages, or USDA loans.
While a broker does typically charge a fee, this is often rolled into the loan, saving the borrower money. However, a borrower should always ask about fee structures before engaging a broker. They may be paid by the lender, charged in additional points, or paid at closing. Choosing the right lender is essential for a successful home purchase. The right mortgage provider can ensure a smooth and efficient process.
3. Enhanced Options for Brokers
Mortgage brokers offer a variety of loan options and price points. Fees and costs vary but they are typically based on a borrower’s credit score, the amount of the loan, and whether or not the lender pays commissions to the broker. Generally, these fees are rolled into the total loan and paid at closing.
Oftentimes, brokers are familiar with niche home loan products and can help borrowers who have bruised credit or limited income qualify for a mortgage. This allows the broker to provide a more personalized experience for borrowers.
Having access to wholesale mortgage lenders gives mortgage brokers the ability to offer more options for their client base. With homebuyer demographics constantly shifting, this added flexibility is key to meeting the needs of today’s buyers. This helps brokers remain competitive and supports their growth for years to come.
4. Increased Productivity
Mortgage brokers are often able to offer clients a more personalized service. They may be available after hours or on weekends, while loan officers at a bank may be limited to the options that their employer offers.
Mortgage brokers can provide borrowers with more information about loans, including their advantages and disadvantages. Brokers can also help borrowers apply for government incentives or grants.
Lastly, mortgage brokers may be able to assist with more complex loan applications that are not approved by a bank. This can save time and money for a borrower.
Being a successful mortgage broker requires balancing many different tasks at once, including communicating with clients, managing paperwork, and connecting with lenders. Using tools that can increase productivity can make it easier to keep up with demand, while still providing top-level service to every client. Having a clear process and structure in place helps ensure that the team stays organized. This allows them to work smarter and faster, increasing their Productivity metric.