Your two main choices when looking to finance buying a home are the bank and a mortgage broker. If you choose to go down the broker route you can find some pretty sleazy characters out there. That means you have to be careful because they can be worse than a bank. But it’s not all bad news, so instead of using this to unmercifully bash mortgage brokers, I’ll be more objective and list the pros and cons. By the way, banks deserve their own bashing session but that’s for another time.
We’ll start off an a positive note here and say that using a mortgage broker can save you oodles of leg work in the mortgage shopping process. Because they do this for a living they know more people and have more contacts that you can find on your own. You might want to ask about their connections just to make sure. But the mistake easily made here is letting them broker do all the work. That is paving the road for disaster. What you’ll need to do is some basic homework on your own and know enough to tell when something is amiss.
One sign of a good broker is when you can’t just pick up the phone and say, “Let’s get together.” The reason is they are working for a select group of lenders, and they know the criteria you need even before being considered. They won’t waste your time, and you won’t waste theirs. Plus, this select group of brokers are likely to have access to very good rates for buyers, and they will not want to be handling an avalanche of unqualified callers just to get the low rate. People talk.
On the downside, instead of dealing with a process you will be dealing with a person. You might think they’re an ass or vice-versa. In other words, personalities can clash and if the broker has a great deal for you that clash can make the process far more stressful than it needs to be. If it closes at all. Often that clash, many times unspoken, is about money because the more expensive the house you buy the more money they will make. It’s something like dealing with a car salesman because they want you to buy the most expensive models while you’re only trying to get what makes you comfortable. It’s just that a house is 10 times the price of a car.
Finally, there is the simple reality that a broker is a financial middleman. They can give you estimates, rates, etc. but in the end they are not the final decision maker. When it comes to money, you always want to be dealing with the final decision maker if at all possible. For example, if your kid tells their friend that you will be able to get them the $100 they want for a new bike from dad, it’s best to talk to dad first. Brokers have their place in the mortgage market but buyers need to know they’re in the right place.