Should I use a mortgage broker?

Question

Hi,

I am new to the investing world and actively looking at properties to invest in, interested in doing house hacking with multifamily. I was curious on how I should get started with obtaining loans? Should I just go to different banks and see what they offer or should I get a mortgage broker to assist me with that?

Thank you in advance

Account Closed · Answer

A mortgage broker has access to better financing, is easier to work with and has access to many, many banks and lenders. It saves you a lot of time and effort.

Matthew McKee · Answer

The beginner’s guide: Broker all the way, FHA loan at 96.5% LTV and house hack while adding value.

Dan Schwartz · Answer

If you go the non-bank route, make sure you are with an actual broker who has access to multiple funders. Many independent brokers get swallowed up by financial companies that only sell their own paper. It’s not competitive, but since it doesn’t say “Bank of America” on the door, one might assume it’s a broker.

A purchase last year was at 2.875 with a broker; the financial company that used to be a broker could do no better than 3.625.

Greg R. · Answer

I agree w/ Account Closed, I've had much better outcomes with brokers vs direct lenders. Many more options, more flexible, more products available.

Angelo Valadez · Answer

No doubt brokers are the way to go, more access to lenders, programs, and products... but you win by finding a broker dually licensed as a mortgage broker and realtor. I waive the loan commission when I represent the real estate side.  Example 1.5% of 800K loan = $12k savings

Jonathan Hankins · Answer

The brokers are usually paid a commission by the lender for bringing them a customer (you). You can always ask them what their fees are too - brokers only make money when they write loans, so they all want to talk with you and try to get you approved.

Melissa Deacon · Answer

Thanks for this information. How exactly do they get paid? Is there usually a flat rate or do I have to search for the "best" broker with the best price. Sorry if this is a dumb question just really trying to find out how exactly it works.

Jonathan Hankins · Answer

If you are just starting out, I would use a mortgage broker. They should be able to lay out your options and make the process easy for you. They should have access to multiple lenders - and since they get paid when you loan closes - it's in their best interest to make sure you are successful.

Adam Lippa · Answer

I've not had great luck with a mortgage broker I have used 2 times before (fool me once, right). I like the idea in theory, and use a local insurance broker, but I have since been trying to use a local bank consistently. My biggest gripes with the broker (who was local) was the first time the rate went up (not a ton, 1/4-1/2% maybe) after discussing the rates and attempting to lock it in because of a mistake made (I believe checking a veteran box perhaps). A year couple years later I tried the same broker again and prior to closing there were major issues with satisfying the broker's insurance requirements since they want to sell off the loan right away. I was trying to add the property onto my existing business policy and therefore was unable to show proof of the full next year of insurance. The whole thing was pretty frustrating and all happened in the 48 hours before closing and left a bad taste in our mouth. Clearly other people have had better experiences. Both loans through the broker have been sold numerous times which isn't a huge deal, just extra time and paperwork tracking expenses.

Our local bank has competitive rates and will continue to service the loan for the entire term. They have been great to work with when small issues come up.

Good luck!

Erik Estrada · Answer

The benefits of using a mortgage broker over a retail bank is that you are hiring someone to do all the work of finding the best terms and rates for you. For example, one investor got quoted at a 6.25% rate going retail. Going wholesale, that same loan was selling for 5.99%. Additionally, many mortgage brokers have good relationships with lenders that they frequently refer out business to. For example, you may be quoted at a 5 year prepayment penalty going retail, while when you work with a broker, he will get you a 1 year pre payment penalty.

Should I use a mortgage broker?

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