First Deal - Do I Need a Mortgage Broker?

[Alex Read]

I am planning on purchasing my first rental property within the next year. I am currently in contact with a potential broker who let me know what he can do for me. He seems very knowledgeable and was introduced to me through a mutual friend. My understanding is that he will consolidate different loan options from lenders in the area and help me choose one that fits me best. It sounds like that will save me a bunch of legwork and give me a solid comparison. I believe the lender also pays the broker fee. 

What is your opinion on mortgage brokers? Should I be calling/going into banks on my own to build a relationship with a local lender? What's the best way to compare different loan offerings in my area? I am a first time investor so any/all opinions will be helpful!

[Chris Mason]

Originally posted by @Alex Read:

I am planning on purchasing my first rental property within the next year. I am currently in contact with a potential broker who let me know what he can do for me. He seems very knowledgeable and was introduced to me through a mutual friend. My understanding is that he will consolidate different loan options from lenders in the area and help me choose one that fits me best. It sounds like that will save me a bunch of legwork and give me a solid comparison. I believe the lender also pays the broker fee. 

What is your opinion on mortgage brokers? Should I be calling/going into banks on my own to build a relationship with a local lender? What's the best way to compare different loan offerings in my area? I am a first time investor so any/all opinions will be helpful!

 I was a banker for 5 years. Jumped ship a few years ago when it became the case that these a-hole 3rd party brokers could broker a loan to the mortgage company I worked at, and get the consumer a better deal, and faster turntimes, than I could as a direct employee of said mortgage company. As a "captive vendor" employee, I wasn't the priority over the independent broker who could take the deal anywhere.

Maybe it'll switch again, and I'll jump ship again. No skin off my back. But that's where things are at for now.

It takes typical area loan amounts being about (rough ballpark) $200k or more for #brokersarebetter to be the relevant hashtag. You might find that's a wash if the relevant loan amount for the area is in the $150k to $300k neighborhood. But that's why you see bankers / direct lenders in Ohio, etc, boasting on these forums, as well as mortgage brokers in the urban East Coast markets, or California -- in their respective markets, they are ALL telling the truth, for THEIR markets. Direct lending / banking seems to scale down to the smaller typical loan amounts better, brokering (for now, at least) seems to scale to the larger typical loan amounts better. If I moved to Nebraska, I likely would not continue to be on the broker side, I suspect I would find that working at a mortgage company as a direct lender / banker is the better route. 

Direct and brokered are just a pair of distribution channels, each with their own costs that are ultimately passed on, unique to that distribution channel.