Mortgage broker or realtor ?

Question

Hello guys, Juan here with another question for my fellow investors and knowledgeable veterans, what is the difference between a mortgage broker and the realtor ? Should I go with a realtor to help me find my first multifamily / or condo

Or should I be looking for a mortgage broker ?

Did you use either or on your first deal?

Do you continue to use them?

Are there heavy fees?

Thanks in advance

David M. · Answer

@Juan Campos

To clarify, a "mortgage broker" will market your loan requirements to multiple mortgage lenders to try to find you the best deal.  For his or her services, you will pay an origination fee.  Unless you have some more "exotic" requirements, you can just find "any" mortgage lender yourself.  Since you are just starting, you probably don't have a super exotic requirements.  The deposit banks (e.g Chase, wells Fargo, Bank of America, etc.) are doing the minority of the originations nowadays so you should probably look at a mortgage lender.  They are a dime a dozen.  Its not about the company as much as the loan officer.  They knowledge, availability, and helpfulness will be key to getting the right loan product.  "Shopping" for a lender can be difficult because they can quote you "whatever" they want in my opinion.  It really matters when after you apply for your loan and you lock rate.  For a conforming loan, they are all working from the same market really.  Its just their other rates that matter in my opinion, which at the end of day is peanuts to the overall deal --- in my opinion.

As mentioned, real estate agents/brokers basically help you find the property.  One clarificiatino on compensation is while the buy or sell side MAY earn 3%, the Broker (or the "house" in some vernaculars) gets the 3%.  The agent who worked the deal with you gets a cut of THAT amount.  So, for all the time spent finding the property and getting through the deal (also advertising, etc), the agent actually gets paid a much smaller amount than most people think.

As far as what you mentioned as a "down payment assistance program," what was explained above is different.  Its common for the buyer to be short sufficient cash to close.  So, a seller concession is negotiated where the seller gives the buyer some amount, say $3k for this example, to the buyer expressly to cover closing costs.  Depending on how this is negotiated, the seller is not negatively affected if the purchase price is negotiated to be increased by $3k.  So, the net to the seller is the same.  However, the buyer is able to include the LTV percentage of the $3k into the loan amount.  This is only possible if both sides agree and the buyer is able to qualify for the increased loan amount (which includes the property appraising for the additional $3k which can be a sticking point if the concession, associated purchase price increase, to very large).

Hope this helps.  Good luck.

Jeff Shumway · Answer

@Conner Olsen the origination fee is typically paid by the buyer and in most cases cannot be financed into the loan amount. The only way to finance in the closing costs would be to give a lender credit by increasing the interest rate slightly. This is a little more dependent on the deal and cannot be done on every deal. The bank that services the loan does not pay an origination fee.

Conner Olsen · Answer

@Jeff Shumway if you use a mortgage broker does the buyer have to pay that origination fee? Does the bank that services the loan pay that fee? If the buyer pays, can that fee be financed by the buyer or is it a part of closing costs?

Jeff Shumway · Answer

Hey Juan, you will need both to complete a real estate purchase. The mortgage broker is the one that connects you with financing to purchase the home. The realtor is the one that shows you all the different properties. The mortgage broker is the one with the money- realtors are not banks. They do not have money to lend to purchase a home.

Unless you have the money to buy the property cash, you will have to use a mortgage broker of some sort. You also will more likely than not have to use a realtor as well since they have access to the lockboxes on the houses. Realtors are definitely less necessary than a mortgage broker.

Typically realtors expect to make 3% on your deal but their fees are usually paid by the seller. Mortgage brokers usually charge some sort of origination fee and also make their money by selling your loan on a secondary market. For example, our fee is $1485 to cover processing and underwriting.

Juan Campos · Answer

@David M.

Just what I needed, thank you for being detailed and taking the time to answer I appreciated it!

Juan Campos · Answer

@Jeff Shumway

That's sounds like a down payment assistance program, where you roll over some closing costs into the loan at the price of a higher interest rate.

Thanks for all the information, I had an idea of how it worked but someone I spoke to confused me

Thanks for clearing it up

Mortgage broker or realtor ?

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