Part of my time is spent working as a broker and I would add to the comments of others as follows :
There are several advantages of dealing through a broker rather than dealing with a bank direct some of which are detailed below. If your loan application is straightforward the broker will be able to place you with a Tier 1 lender and there will not be a broker’s fee payable by you as the bank will pay the broker out of their own pocket.
The advantages of applying through a broker are as follows :
1. There may well be a particular Tier 1 lender whose product is superior for your particular circumstances.
Dealing with a bank direct, the problem is that the finance person in that bank is hardly likely to tell you that bank ABC has a better deal than the bank which employs him, is he now ?
2. You may well find yourself in a situation where (incomewise) you don’t quite qualify for a loan with that bank under your particular cicumstances.
The finance person in that bank is likely well aware how he can make you qualify but he is hardly in a position to tell you to structure your application in a different manner.
After you have disclosed certain facts to him/her you are no longer in a position to change your story.
Against that, a broker is in a slightly different position and, after establishing your particular circumstances, he usually would make gentle suggestions to you to present a slightly different picture so that you do qualify. The above doesn’t necessarily mean that the broker would suggest that you to do something illegal.
A couple of examples ? Well you may just miss out on qualifying for a loan and the broker may well know the solution for you.
Another advantage (of dealing through a broker) is if you happen to have a default noted on your credit file. Often a simple explanation would save the day.
3. Many mainstream lenders may at times indeed take as long as two weeks to approve a loan (subject to valuation). If you are under time pressure the broker is likely to be aware of a lender whose turn around time to give approval is say 3 hours !!
4. If there is a problem with either your income or with the property you aren’t a straightforward case and the bank may refuse to lend. If you then apply to another couple of lenders and the same thing happens it will become almost impossible to get a loan elsewhere (except at exhorbitant rates).
A broker is aware of a lender’s criteria and
won’t apply to a lender unless he is 100% certain that you will qualify.
It is a win/win situation to deal through a broker. In the USA about 75% to 80% of the loans are placed through brokers. In Australia the ratio is at present more like 30% (and increasing).
I would go as far as saying that to go directly to your friendly bank is in many cases, more likely than not, actually a foolish thing to do.
I do suggest however that you are completely honest with your broker right from the start and tell him the full facts beforehand rather than he finding out the warts when it is too late to save the day.
Please note that I am not talking through my pocket as most of my business isn’t derived from mum and dad’s type of loans.
Finally, yes, I am aware that there are a few bad apples amongst brokers (just as there are in the general community) so my advice is to not pay any broker’s fees (if applicable) upfront as you may be dealing with a crook. Paying a lender’s application fee and valuation fee (if applicable) is of course a different story.
Cheers,
Pisces133
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