Most consumers assume that ‘mortgage companies’ are banks that lend their own money. The truth is a company that you deal with could be either a mortgage banker or a mortgage broker.
A mortgage banker will lend you its own money, although it does often sell the loan to the secondary market. Mortgage bankers (known as ‘direct lenders’) sometimes keep servicing rights for themselves.
A mortgage broker is a middleman who does the searching and analysis for you, the borrower. Once a good deal is found the mortgage broker brings the lender and borrower together. Many of the lenders that the broker deals with will not deal directly with the public.
By using a mortgage banker, the borrower can eliminate the fees of a middleman and can make the loan process easier. A mortgage banker can give your loan direct approval, whereas a broker will give you the information second-hand. However, many mortgage banks are limited in what they can offer, which is basically their own product. On top of that, if you badly present your loan application, you have already made a bad impression. Understand that presenting a loan to a lender is like presenting a job application to an employer, there are many ways to do it, all of which are valid but some are perhaps better than others. Using a mortgage broker allows you to present a loan application to a different lender in a different and sometimes better light.
A mortgage broker does charge a fee for his services, but has access to a wide variety of loans. He may also have knowledge of the best ways of presenting your loan application to the different lenders for approval. Some mortgage bankers also broker loans. As an investor it is wise to have both a mortgage broker and a mortgage banker on your team.
Choosing A Lender
Choosing a lender that you want to work with involves several important things. You need a lender that can do that little bit extra when you need it and get the job done on a deadline. You also need a lender that is large enough to entice customers, but small enough to give you personal attention. Most of all, you need a reliable lender that can deliver what it promises. This may mean finding a lender in NSW, VIC, ACT, SA, WA, NT or TAS. It doesn’t matter as long as they’re reliable and easy to contact.
1. Length of Time in Business: Since the mortgage brokering business is not highly regulated in most states, there are a lot of dodgy operations, however bad mortgage brokers don’t last very long. The best option is to look for a company that has been in business for a few years. Find out a bit about the company’s history. Check to see if any complaints or investigations were made against them. Finally, ask for referrals from other investors and real estate agents.
2. Company Size: A big company can sometimes be a problem due to multiple people handling your case. If you are dealing with a mortgage broker, it is often a one-person operation which can be good in communication terms, but on the other hand, the individual may be difficult to contact if he or she is constantly answering the phone.
A company that is small to mid-sized is a good bet. The boss will be available if necessary but he or she will have staff to take care of the minor details. Also, a mid-sized company may have access to more wholesale lenders than a one-person company.
3. Experience in Investment Properties: An important thing is to deal with a mortgage broker or banker that has experience with investor loans. Owner-occupant loans are totally different to investor loans and it is important that the broker or lender you are dealing with has a number of different programs. Often you find out a particular loan program won’t work, in which case you need to switch lenders (or even loan programs) in an instant to meet a funding deadline.