Mortgage Brokers vs. Online Lenders: Who Comes Out on Top?
✦ 5-minute read ✦
We all love to personalize our lives: our pizza toppings, our coffee order, our music playlists and everything in between. Why should our mortgages be any exception? On the road to becoming a homeowner, there is no such thing as a one-size-fits all approach. Learn the ins-and-outs of mortgage brokers and online lenders to choose the right path for you!
The 411 on Mortgage Brokers
Unlike online lenders, who exist in large part behind your computer screen, a mortgage broker is a living, breathing human being. Working with a mortgage broker means meeting face-to-face to discuss your mortgage at every stage in the process. Some people enjoy the personal touch a mortgage broker brings to the table, while others might find the meetings difficult to schedule.
Based on your needs, a mortgage broker will use their wide network of lenders to find you the home loan that suits your needs. There are some lenders that work exclusively with brokers, so brokers can potentially offer up mortgages you might not see anywhere else. In addition, lenders might offer a broker better loan rates and terms than they would to someone who came in off the street.
Because mortgage brokers know the industry inside and out, they can also help steer you away from lenders with hidden fees and undesirable loan terms.
There are plenty of downsides to working with a broker. Brokers are either paid by you, the borrower, or by the lender. If you are paying the broker directly, their fee will be based on a percentage of the mortgage you select. Be aware that a less honest broker might push you towards a more expensive home loan, not because it makes sense for you financially, but simply because they want to increase their commission. If the broker is being paid by the lender, they might recommend loans based on which lenders they get a higher commission from, not necessarily based on who can offer you the best mortgage rates and terms.
If you choose to go forward with a broker, be sure to do your research on the mortgage industry beforehand so you will already be informed on what rates and terms you can expect.
Online Lenders 101
When it comes to online lending, speed is the name of the game. Online lenders are designed to be user-friendly alternatives for people seeking a mortgage in a fast-paced digital world. With online lenders you can apply for a mortgage, watch the game and eat dinner all at the same time.
Not all online lenders work the same way. Mortgage lenders like Quicken Loans is a mortgage provider that sells mortgage loans directly to borrowers. There are also loan marketplaces like LendingTree, which more closely resembles a mortgage broker; you fill out one application and subsequently get matched with a range of mortgage providers based on your credit score, desired loan amount, location and other determining factors.
Because the online mortgage industry is highly competitive, you might find that you’re able to get lower rates and more desirable loan terms when you work with an online mortgage lender. Online lenders also tend to boast lower closing costs, because they don’t have brick and mortar expenses like office space to cover.
If you have a less than excellent credit score (under 700), online mortgage lenders could be the best option for you. Because they aren’t subject to the same underwriting investors as big banks, you could get a much better rate online than you ever possibly could with a conventional lender or a broker.
While online lenders offer lots of benefits, there are also some risks. Whenever you submit sensitive information online, be aware of scams and fraud. Be sure to research online lenders to ensure they prioritize safety and offer extensive customer support. Even though online mortgage lending can be an entirely digital process, it’s important to have the option to call or connect with the lender so they can walk you through complicated paperwork and forms in the event you need some help along the way. If you make a mistake on one of your mortgage forms, it could drastically affect your rates and terms and bring your mortgage application to an annoying halt.
Choose Your Own Adventure
When it comes to your mortgage, it pays to personalize. Whether you choose to work with a broker or take the online lender route, you have to approach your home loan that makes sense with your lifestyle and priorities. Keep yourself informed, compare and you’ll be in your dream home in no time!
Ready to become a homeowner? Compare top mortgage lenders:
Quicken Loans offers up to $3 million in loans for qualifying borrowers, and both the application and approval process go very quickly due to the top-rated technology Quicken Loans uses. Rates are updated on a daily basis, so don’t be surprised to receive different quotes on different days. The upside is, Quicken offers a large variety of mortgage options, including 15 year options, and has specific loans for low-credit situations.
- Minimum down payment of 3% on government back loans, 5% on conventional loans%
- Fast online application
- Live chat
Best for: Tech-friendly borrowers who want access on all their devices
Best perk: Low-credit option
LendingTree is a loan marketplace that allows you to search its network of 350+ partners and find the mortgage that’s best for you. Using LendingTree is free and doesn’t affect your credit score, which means you can search risk-free for the best 15-year loans out there. What’s more, because it has so many partners, you can find the best loans to suit your specific financial situation and repayment needs.
- Checks your credit score for you
- One form for multiple lenders
Best for: Borrowers looking to compare rates and options quickly
Best perk: 5 free quotes