Mortgage 101: Lenders and Brokers
During the mortgage process, you can either engage with a lender directly or a broker that can find a mortgage for you. So what exactly is the difference, and which one is better for you?
Lenders
You can obtain a residential mortgage from several types of lenders, such as:
Banks
Mortgage Companies
Credit Unions
Caisses Populaires
Insurance Companies
Trust Companies
Private Lenders
Some of the lenders focus on prime quality mortgage borrowers and some focus on non-prime borrowers, but you’ll also find lenders who cater to both. Keep in mind that non-prime lenders have different underwriting requirements for the mortgages they provide and also charge higher interest rates.
When talking to a lender, they will only be able to inform you about their own mortgage offerings. If you want to see what is available across the marketplace and do a little mortgage shopping, you need to take a different approach.
Traditional Mortgage Brokers
The key difference between lenders and brokers is this: Mortgage brokers don’t lend money. What they do is provide advice and help you to find the right lender for you. Brokers do not charge fees for most loans, although they may charge fees for subprime loans. Their main source of income is commission paid to them by the lenders.
Some lenders originate all of their mortgages via brokers, while some use brokers for a portion of their lending or not at all. Most reputable and experienced brokers have access to many lenders and can potentially offer you a wide variety of alternatives. It’s important to note that many brokers focus the majority of their business with only a couple of lenders and may have a bias to offer you a mortgage product from these favored lenders. Be sure to check that your broker is showing you the best products available for you (and that they are properly licensed by the province that they work in!).
Online Mortgage Brokers
There are now a variety of online brokers available to you in the market. Using an online broker can simplify the process for you and sometimes make shopping for a mortgage much easier and less stressful. Be sure you are selecting an online broker, like Frank Mortgage, where transparency and openness are a priority. At www.frankmortgage.com, you can see what lenders you qualify for and what products those lenders can offer you with no bias or filtering by an intermediary. You can review what the market has to offer you in one place and then make your own independent choice of what mortgage best suits you.
If you’re feeling overwhelmed by the idea of getting a mortgage, then doing your homework ahead of time can alleviate your concerns. If it doesn’t, you might want to seek out the advice of a broker or lender sales representative to guide you. But if you’re prepared and tech-oriented, then what you need is an online solution that provides you with accurate information and gives you open and transparent access to your mortgage alternatives. Your mortgage experience doesn’t have to be complicated or controlled by a third party. Frank Mortgage places you in the driver’s seat with a proprietary and secure online mortgage marketplace that is built for today’s borrower.
Don Scott
Don Scott is the founder of a challenger mortgage brokerage that is focused on improving access to mortgages. We can eliminate traditional biases and market restrictions through the use of technology to deliver a mortgage experience focused on the customer. Frankly, getting a mortgage doesn't have to be stressful.
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