When buying a first time home, an investment property or refinancing for a better rate and monthly savings, a borrower is never short on options. Choosing the best one involves weighing many different factors and needs.
For those lenders looking for the most leverage in having the most options hiring a Mortgage Broker is the wisest choice! A Mortgage Broker has access to a great deal more programs and funding products and will give a borrower several unique funding structures that other lending organization and big banks simply do not have access to in their litany of funding.
Mortgage Brokers also have more options in regard to reduced interest rates, lower down payments, down payment waivers, and the list goes on. However, using a Mortgage Broker with access to more creative funding options comes with a premium price. An up front fee as high as sometimes 2%- 4% is attached to the funded loan. For those borrowers who have some credit issues or tighter budgets for a large down payment will usually opt for a Mortgage Broker, as their options for getting funded is much greater. But not all borrowers are the same.
Some borrowers have very good credit and a good down payment and may choose to go with an established lending organization, which doesn’t build an extra fee onto the loan. These loans are often referred to a “A” paper loans and usually take about 30 days to fund. Many times the interest rate is much better and with A paper loans you can get locked into a longer rate with a fixed variable and rarely a prepayment penalty. Of course, the borrowers are relegated to that particular lending organizations products and programs, which are often time much more limited to what a Mortgage Broker can offer.
Lastly, borrowers can choose to go with one of the big banking institutions that comes with more prestige, stability and security. These big banking institutions can really lift a borrower’s credit worthiness quite high and often times interest rates and terms are very very good. Of course, with bigger banking institutions, comes a great deal more paperwork and due diligence. Choosing a high profile big bank can often lead to sometimes a 45-60 day wait on funding and closing. For those borrowers with the best credit and who doesn’t mind the wait, big bank lending is optimal. But borrowers should be warned that the paper work is much like processing a huge novel; there is no shortage of papers to sign!
So to recap:
Mortgage Brokers: Excellent choice for those borrowers with less resources and average credit. Mortgage Brokers have many more funding options available.
Lending Organizations: Great choice for borrowers that don’t need creative financing and who have a score of 675 or above. Also for those who are okay with more limited options
Big Banking Institutions: These loans are considered “A” paper and borrowers usually get the best rate available. However, the paper trail is quite extensive and some times these loans take so long to cross the T and dot the I that it could take 45-60 days just to close. For some that is an eternity!
In closing, this is just a very cursory summary of the different ways to go as a buyer looking for funding. It may be that a borrower uses one method for their first home and a different method for their refinance package or investment home. Truly the only thing that matters is what the borrower feels most comfortable in doing and what their budget and life style will allow them to do.