Bank or mortgage broker?

[Bola A.]

Hello BP, With a good credit, Is it better for me to go to the back for financing or through mortgage broker? Thanks.

[Marty Johnston]

@Bola A.

There's more to be said here I think. While there is obviously a benefit to utilizing both - does your situation allow for it? Demand for it? It's important to understand the benefits of utilizing a broker, and also the reasons that you may not want to.

First, Reasons why would you NOT choose to utilize a broker's services:

#1 Brokers are not free. If you are short on liquidity for closing, you may be able to save yourself some capital at the closing table when it's time to pay the broker for their services.

#2 If you have the time, drive, and ability to shop your own deal and have access to a wide lender base - you may very well be better suited to broker your own deal for the same reason as #1. This is if you feel confident you can find the best financing available for your deal without utilizing the Rolodex of a good mortgage broker

#3 You're bankable. If you can walk into your local bank with great credit, have no capped yourself on the governed Fannie REI's, and are able to spend the time yourself to go through the full-doc underwriting process, title commitments, property insurance correspondence, and appraisal stages, then I think you're better off going that route. You'll learn something about the process, and also about your investment.

Reasons why you WOULD choose to utilize a broker's services:

#1 In direct reflection of the above, if you don't have the time, wits, or desire to shop your deal to 10+ lenders (Of whom you don't even know will lend on a deal such as yours, ) then you may really need the services of a broker to get the best program available for you. A good broker will see your deal, know right away which 10 lenders will entertain it, who will offer the best rates and terms (based on prior closings with said lender), and truly expedite this process 10-fold. A bankers relationship is not only key, but priceless, which a good broker will have.

#2 If you're NOT bankable. Same reasons as above - if you aren't bankable for whatever reason (capped on fannie properties, poor credit, past BK etc.) then you may not know how to reach that secondary market. This is most broker's PRIMARY market, as these are 99% of the deals they will do. A broker can show their true value here when assisting in getting your deal to the right desks.

#3 Your time is precious = A broker saves you an incredible amount of time. A full service broker/consultant shop with shop your deal, correspond on your behalf, acquire all docs, work with (and in some circumstances, locate) your title company, doing all correspondence not only between the borrower and the title company, but also between title and the lender. In the same way, a full service broker shop with correspond with (and in some circumstances, locate)  your property insurance at the same capacity. They can keep deals alive when would otherwise be dead. This, in opposition to #1 above, is why brokers have/deserve a fee. This fee is contingent on closing, so they don't do a job, they lose too.


Now there are Good brokers, and bad brokers. Find yourself a good one, and you'll be ever glad you did. For experienced investors, they can be a vital part of your team - closing your deals for you while you find them.

My $0.02! 

Marty J