First-time home buyers often wonder if reaching out to a bank or a mortgage broker is the best option for them.
For a first-time home buyer, navigating the landscape of mortgage products can be a daunting task to say the least. You’ve got conventional vs. government insured, FHA, VA, USDA, Fixed, Adjustable, jumbo and the list goes on. For the first-time home buyer, this can all sound like “Greek” not to mention the stress associated with making the most important purchase decision of your life. While there are two basic options of acquiring a mortgage (direct lender/bank or mortgage broker), many questions remain, especially for millennials, who make up the majority of first time home buyers.
Direct Lender vs. Mortgage Broker?
Too often, first-time buyers make mistakes that end up costing more in the long run. For example, a certain mortgage product might be geared towards long term occupancy, but if misunderstood, a buyer could pay significantly more if they ended up leaving the home sooner…and vice versa.
Many first-time home buyers end up with a direct lender, usually through referral by their real estate agent. Since direct lenders can only offer the products they sell, they tend to match the borrower to their product instead of the other way around, which often results in wasted valuable time or not getting the best mortgage based on your unique needs.
Key Factors to Consider
What are the cost differences between a direct lender and a broker? You want to look at the total mortgage costs. Note, that total costs are not the same as fees. While you need to compare the fees charged by direct lenders or brokers, it’s wise to compare the total mortgage costs to make the best choice. For instance, what are the costs of having too few mortgage choices? If the lowest cost mortgage for you never makes it to your comparison list, you probably will pay more than you need to. Another cost to consider is processing time. If your mortgage provider takes months to process your application, you will pay unnecessary rent as well as other expenses. When it’s all said and done, most first-time buyers match well with a mortgage broker.
Ok, you are convinced that a mortgage broker is the way to go, but aren’t all brokers the same?