The other day I had clients with a huge down payment and spectacular credit scores suddenly find themselves unable to get a loan from a traditional bank on a slightly unusual home they wanted to purchase.
When I suggested they contact a mortgage broker I knew who could help them, they panicked.
They said they didn’t want to overpay and didn’t want to get taken. They had great credit and shouldn’t have to go to a mortage broker to get a loan.
That’s when I realized perhaps they were confusing a mortage broker with a loan shark.
A mortgage broker is not a high interest, hard money lender who wears a fedora, smokes a cigar and meets borrowers in a lonely, dark alley.
A mortage broker is simply someone who works with several different banks and lenders, which allows her to compare interest rates and prices for her clients, as well as find them alternate sources of financing if oneparticular institution is resistant to lending on the property.
One mortgage broker may offer loans from reputable institutions like U.S. Bank, Citimortgage, Chase and Bank of America. She may also have relationships with other, smaller investors (banks), who are more willing to lend on unusual properties.
In my client’s case, the underwriter at the traditional bank they initially consulted for financing chose to interpret guidelines issued by Fannie Mae and Freddie Mac more restrictively than they were written. As a result, the bank’s loan officer, being an employee of that institution, couldn’t help them any further. She had one choice only, and the answer was no.
The mortage broker, on the other hand, was able to consult several equally prominent lending institutions and quickly find my clients a loan.