Why Choose a Mortgage Broker?
Why Choose a Mortgage Broker?
A mortgage broker is not restricted to one lender's rate sheet, credit requirements, underwriting overlays, loan programs, appraisal policies, or internal company rules. We can compare the approved wholesale lenders available through our network and look for the lender that fits your individual situation.
A loan officer working directly for a bank or mortgage lender generally works within that company's own programs, pricing, underwriting requirements, and internal policies.
If that lender does not offer the program you need or one of its internal overlays prevents approval, the answer from that institution may simply be: "No."
A mortgage broker works differently.
We can compare the lenders and programs available through our approved wholesale lender network and look for another lender whose guidelines better fit your circumstances.
VA does not establish a universal minimum FICO score for its home loan guaranty program.
Individual lenders can establish their own minimum credit-score requirements.
One lender might reject a Veteran because the score does not meet that company's internal minimum even though VA itself has not established that minimum.
As a broker, we can evaluate whether another lender available to us has a more appropriate credit policy for that Veteran's overall financial profile.
A standard VA Streamline IRRRL generally does not require a new VA appraisal.
An individual lender may nevertheless require an appraisal, valuation, or additional property documentation under its own lending policies.
If one lender imposes an appraisal requirement and another appropriate lender does not, a broker may be able to select the lender whose requirements better fit the transaction.
Similar lender-specific differences can apply to credit reports, income documentation, property requirements, loan-to-value limits, and other underwriting overlays.
An Overlay Is an Additional Requirement - It Does Not Replace VA Rules
A lender cannot ignore an actual VA requirement.
Every VA-guaranteed mortgage must satisfy applicable VA requirements.
The difference is that individual lenders can establish additional requirements for loans they are willing to fund.
A broker's advantage is the ability to compare lenders and potentially avoid a lender-specific restriction when another approved lender offers a qualifying program without that particular overlay.
A bank, credit union, or direct mortgage lender may offer many different mortgage products.
But its loan officer generally works within that institution's:
- Product menu
- Rate sheet
- Minimum credit-score requirements
- Underwriting overlays
- Appraisal and valuation policies
- Income-documentation policies
- Property restrictions
- Loan-to-value limits
- Manual-underwriting policies
- Fee structure
- Operational procedures
- Rate-lock policies
- Current processing and underwriting capacity
If that institution cannot make the loan, its loan officer generally cannot simply place the transaction with a competing wholesale lender.
Mortgage brokers establish wholesale relationships with multiple mortgage lenders.
Instead of asking only:
"Can this one lender make the loan?"
we can ask:
"Which lender available to us is the best fit for this particular borrower and transaction?"
Lender Requirements Can Differ in Many Ways
There is an important difference between:
"The loan does not satisfy an actual VA, federal, state, or legal requirement"
and:
"This particular lender will not approve the loan under its own internal policy."
If the problem is an actual VA program requirement, another lender cannot simply ignore it.
But if the problem is a lender-specific overlay, credit minimum, valuation requirement, property restriction, loan-to-value limitation, or other internal policy, another available lender may have a different answer.
A mortgage broker collects the core information needed to evaluate your mortgage.
That may include:
- Your mortgage application
- Credit information
- Income documentation
- Asset information when applicable
- Mortgage statements
- Property information
- VA eligibility information
- Title and lien information
- Other supporting documents
If a selected lender develops a problem, much of the core loan file can often be used to evaluate another approved lender rather than forcing the borrower to restart the entire mortgage process.
A new lender may still require lender-specific disclosures, electronic signatures, updated information, or additional underwriting conditions.
Different Lenders Can Also Have Different Pricing
Mortgage lenders establish their own rate sheets, discount-point structures, lender credits, fees, and pricing.
A direct lender can show you the pricing available from that institution.
A mortgage broker can compare pricing available through multiple approved wholesale lenders.
Compare the Complete Loan - Not Just the Interest Rate
We look at the combination of:
- Interest rate
- APR
- Discount points
- Origination charges
- Underwriting charges
- Processing charges
- Lender credits
- Rate-lock period
- Monthly payment
- Cash required at closing
- Total loan cost
The lender advertising the lowest rate is not automatically offering the lowest-cost loan.
Every bank, credit union, mortgage company, and wholesale lender has its own business structure and pricing model.
Mortgage companies have operational expenses such as employees, underwriting departments, technology, compliance, management, office infrastructure, and other business costs.
Mortgage pricing reflects many factors including market conditions, investor pricing, loan characteristics, lender capacity, and each company's own business structure.
A broker can compare wholesale pricing from multiple approved lenders rather than being restricted to one institution's pricing model.
How Is a Mortgage Broker Paid?
Lender-Paid Compensation
In a lender-paid transaction, the wholesale lender pays the broker compensation under the applicable compensation arrangement.
The structure must comply with applicable loan-originator compensation rules.
Borrower-Paid Compensation
In a borrower-paid transaction, the borrower pays the disclosed broker compensation as part of the transaction.
Depending on the transaction and applicable requirements, this can provide another structure for comparing rate and cost combinations.
Mortgage Broker Compensation Is Regulated
Mortgage broker and loan-originator compensation is subject to federal and applicable state rules.
Compensation generally cannot vary based on a loan term such as the interest rate.
When a mortgage broker receives compensation directly from the borrower on a transaction, applicable federal rules generally restrict another person from also paying loan-originator compensation on that same transaction.
Once a mortgage is locked, the lender's own lock policy determines what happens if the market changes.
Some lenders may offer a renegotiation, float-down, or other option. Others may not.
A broker has another potential tool: evaluating another approved wholesale lender when there is a significant reason to move the transaction.
We Do Not Move Locked Loans Around Casually
Brokers build important relationships with wholesale lenders, underwriters, account executives, and operations teams.
Repeatedly abandoning locks because of every small market movement is not a responsible way to maintain those relationships.
Changing lenders can also require new disclosures, signatures, underwriting, and processing and can affect the closing timeline.
But changing lenders can make sense in significant circumstances, including:
- The original lender can no longer approve the loan
- A lender-specific overlay unexpectedly stops the transaction
- The lender suspends or eliminates the program
- The lender cannot meet an important closing deadline
- Processing or underwriting delays become unreasonable
- A material pricing issue develops
- Another significant circumstance threatens the transaction
Mortgage lenders change programs, overlays, capacity, and business strategies.
One lender may stop offering a product, tighten credit standards, reduce its maximum loan-to-value, become overwhelmed with volume, or leave a lending channel.
A loan officer employed by that lender is generally limited by what the company continues to offer.
A broker with multiple approved lender relationships may be able to evaluate another lender and preserve a transaction that otherwise could have ended.
The replacement lender must still independently approve the loan, so another approval or closing can never be guaranteed.
Why Multiple Lender Relationships Matter
Mortgage history has repeatedly shown that lenders can change their business models or leave entire lending channels.
GMAC / ResCap
During the mortgage-market downturn, GMAC's ResCap discontinued major portions of its retail and wholesale mortgage origination operations.
Brokers with other lender relationships were not dependent on that one lending source for future transactions.
Wells Fargo Wholesale
Wells Fargo later exited the independent mortgage-broker wholesale origination channel.
Brokers with multiple wholesale relationships could continue evaluating transactions through other approved lending sources.
The Lesson Is Not About Any One Lender
Lenders enter and exit products and lending channels for many business, market, investor, and regulatory reasons.
The advantage of the brokerage model is diversification.
When one lending source changes, a broker may still have other approved lender relationships to evaluate.
VA establishes the underlying guaranty program, but participating mortgage lenders can have additional underwriting requirements and pricing.
Having multiple lender options can be particularly valuable when dealing with:
- Lower credit scores
- No traditional credit score
- Manual underwriting
- Higher debt-to-income ratios
- Unique residual-income circumstances
- VA Streamline / IRRRL refinancing
- Cash-Out refinancing
- Manufactured homes
- Multi-unit properties
- Condominiums
- Remaining VA entitlement
- Second properties
- Rental-income situations
- Solar financing
- Second mortgages or HELOCs
- Government assistance liens
- Shorter loan terms
- Adding a spouse or other allowable borrower changes
- Unusual income sources
- Prior bankruptcy or foreclosure
One lender's overlay does not automatically represent the entire VA lending market.
Mortgage Broker vs. One Direct Lender
| Feature | Mortgage Broker | Direct Lender |
|---|---|---|
| Loan Sources | Mortgage Broker Can work with multiple approved wholesale lenders and compare programs available through those lender relationships. | Direct Lender Generally offers the mortgage programs available through that particular bank, credit union, mortgage company, or lending institution. |
| Credit Requirements | Mortgage Broker Can compare lenders with different internal credit-score requirements and underwriting overlays. | Direct Lender The borrower generally must satisfy that institution's own credit-score requirements and internal underwriting policies. |
| VA Minimum Credit Score | Mortgage Broker Because VA itself does not establish a universal minimum credit score, a broker may be able to look for an available lender whose credit policies better fit the Veteran's overall credit profile. | Direct Lender The institution may establish its own minimum credit score even though VA itself does not impose a universal minimum FICO score. |
| IRRRL Appraisal | Mortgage Broker May be able to choose an available lender that does not impose an additional appraisal requirement when a standard VA IRRRL does not require a new VA appraisal. | Direct Lender If that lender's internal policy requires an appraisal, valuation, or additional property documentation, the borrower generally must satisfy that lender's requirement to close through that institution. |
| Income Documentation | Mortgage Broker Can compare lenders whose documentation requirements may differ, especially on streamlined refinance transactions. | Direct Lender The borrower generally must provide whatever income or employment documentation that lender requires, even when the underlying VA program may permit a more streamlined process. |
| Underwriting Overlays | Mortgage Broker If one lender adds an overlay that prevents approval, the broker may be able to evaluate another approved lender with different internal requirements. | Direct Lender The loan generally must satisfy that institution's underwriting overlays in addition to the underlying VA requirements. |
| Manual Underwriting | Mortgage Broker Can look for an available lender whose manual-underwriting policies are appropriate for the borrower's circumstances. | Direct Lender If that institution does not accept or restricts the particular manual-underwriting scenario, its loan officer generally cannot place the loan with a competing lender. |
| Cash-Out Loan-to-Value | Mortgage Broker Can compare available VA lenders that may have different internal maximum loan-to-value requirements. | Direct Lender The borrower is limited by that institution's maximum loan-to-value policy even when the underlying VA program may permit a higher amount. |
| Property Types | Mortgage Broker Can look among available lenders for programs involving eligible manufactured homes, condominiums, multi-unit properties, or other less-common property situations. | Direct Lender If the institution does not lend on that property type or has additional restrictions, the loan generally cannot be completed through that lender. |
| Second Liens & Solar | Mortgage Broker Can evaluate lenders with different operational requirements for second mortgages, HELOCs, solar financing, UCC filings, subordinations, and similar property issues. | Direct Lender The transaction must generally comply with that institution's specific lien, solar, title, and subordination policies. |
| Rate Comparison | Mortgage Broker Can compare available wholesale pricing, discount points, lender credits, lock periods, and costs among multiple approved lenders. | Direct Lender Quotes the rates, points, credits, and other pricing available through that particular institution. |
| If the Lender Says No | Mortgage Broker Can determine whether the problem is an actual VA requirement or merely that lender's internal policy. If it is lender-specific, another available lender may have a workable guideline. | Direct Lender If the institution cannot approve the transaction, the borrower may need to independently locate another mortgage provider and establish the transaction with that company. |
| If a Program Disappears | Mortgage Broker May already have another approved lender that continues to offer an appropriate program. | Direct Lender The loan officer is generally limited to the programs that remain available through that institution. |
| Rate-Lock Flexibility | Mortgage Broker Can first work within the selected lender's lock policies and, when a significant issue justifies it, may also evaluate whether moving the transaction to another available lender is appropriate. | Direct Lender Generally must work within that institution's own rate-lock, extension, renegotiation, and float-down policies. |
| Processing Delays | Mortgage Broker If a lender develops serious processing or underwriting delays that threaten the transaction, the broker may be able to evaluate another available lender. | Direct Lender The loan officer generally remains dependent on that company's own underwriting, processing, closing, and funding capacity. |
| Application File | Mortgage Broker Much of the core borrower information and documentation can often be reused when another approved lender needs to be evaluated, although lender-specific disclosures and documents may still be required. | Direct Lender Moving the transaction outside that institution generally requires establishing the loan with another mortgage provider and satisfying the new company's documentation and disclosure requirements. |
| Proprietary Programs | Mortgage Broker Limited to programs available through the brokerage's approved wholesale lender relationships. | Direct Lender May sometimes offer proprietary portfolio loans, relationship discounts, or institution-specific products that are not available through mortgage brokers. |
Choosing the lender should happen after understanding the borrower's complete situation.
We look at:
- Credit profile
- Income
- Monthly debts
- Property type
- Available equity
- VA entitlement
- Current mortgage
- Existing liens
- Desired monthly payment
- Loan term
- Interest rate and pricing
- Closing costs
- Closing timeline
- Long-term financial goal
Our goal is not to make every borrower fit one lender. Our goal is to identify which available lender best fits that borrower.
How VA Help Center Uses the Broker Model
Some Veterans have straightforward loan files.
Others have lower credit, unusual income, second liens, solar financing, an unusual property type, remaining entitlement, an IRRRL that should not require a VA appraisal, or another circumstance where lender overlays matter.
Working with a mortgage broker means your options do not necessarily end because one lender's internal rules do.
There Are Situations Where a Direct Lender May Still Have a Good Option
Some banks, credit unions, and direct lenders offer proprietary, portfolio, or relationship products that may not be available through mortgage brokers.
That is why borrowers should evaluate the actual interest rate, APR, payment, fees, credits, guidelines, and loan terms rather than choosing a mortgage provider based only on the type of company.
Common Questions About Mortgage Brokers
Does VA require a minimum credit score?
VA does not establish a universal minimum credit score for its home loan guaranty program. Individual lenders may establish their own minimum credit-score requirements.
If one lender requires a 620 score, does that mean VA requires 620?
No. That can be the individual lender's internal requirement rather than a VA minimum. Another VA lender may have a different credit policy, subject to the borrower's complete credit profile and applicable underwriting requirements.
What is a lender overlay?
A lender overlay is an additional lender requirement beyond the underlying program standard. Examples can include a higher minimum credit score, additional documentation, a lower maximum loan-to-value, or additional valuation requirements.
Can a lender have stricter requirements than VA?
Yes. VA establishes the underlying requirements for a VA-guaranteed mortgage, but individual lenders can establish additional internal lending standards and underwriting requirements.
Can a lender require an appraisal when VA does not?
Yes. A standard VA IRRRL generally does not require a new VA appraisal, but an individual lender may impose an additional appraisal or valuation requirement under its own policy.
Why would a broker avoid a lender that requires an IRRRL appraisal?
If another appropriate lender in the broker's approved network offers a qualifying IRRRL without that additional appraisal requirement, the broker may evaluate using that lender instead. The complete rate, cost, guideline, and transaction comparison should still be considered.
Does a standard IRRRL require full income underwriting?
A standard qualifying IRRRL generally does not use the same full traditional credit and income underwriting package required for a purchase or Cash-Out refinance. Specific exceptions and lender requirements can still apply.
What happens if one lender denies my VA loan?
We first determine why. If the issue is an actual VA or legal requirement, another lender cannot ignore it. If the problem is a lender-specific overlay or product restriction, another available lender may have different requirements.
Does a mortgage broker work with every lender?
No. A broker works with lenders with which the brokerage has approved relationships. Different brokerages can therefore have different lender networks and products available.
Do I have to complete an entirely new application if the broker changes lenders?
Much of the core borrower information and documentation can often be reused. The new lender may still require new disclosures, electronic signatures, updated documents, or lender-specific underwriting conditions.
Can a broker compare rates between lenders?
Yes. A broker can compare available wholesale pricing from lenders within the brokerage's approved lender network. Rates and pricing change with market conditions and borrower circumstances.
Is a mortgage broker always cheaper?
No. Mortgage brokers can access competitive wholesale pricing, but a bank, credit union, or direct lender may sometimes have a proprietary product, promotion, or relationship pricing that is more favorable for a particular transaction. Actual Loan Estimates should be compared.
How does a mortgage broker get paid?
Broker compensation can generally be structured as lender-paid or borrower-paid compensation, subject to applicable mortgage compensation rules. The applicable compensation and loan costs are disclosed as required.
Can a broker change lenders after my rate is locked?
Potentially. A lender change should not be made casually because it can require new disclosures, processing, and underwriting and may affect the closing timeline. A significant pricing, underwriting, program, or service problem may justify evaluating another available lender.
Why is a broker particularly helpful for a difficult VA loan?
VA lenders can have different credit overlays, appraisal policies, loan-to-value restrictions, manual-underwriting standards, property requirements, documentation standards, and operational policies. A broker may be able to compare several available VA lenders rather than relying on one institution's requirements.
Let Us Find the Lender That Fits Your Situation
Tell VA Help Center about your credit, income, property, current mortgage, and VA goals. We can review the lenders and programs available through our network and help identify a competitive option without assuming that one lender's internal overlays apply to everyone.
FIND MY VA LOAN OPTIONS Call 801-871-3739VA Help Center, LLC is a private mortgage company and is not affiliated with, endorsed by, or acting on behalf of the U.S. Department of Veterans Affairs or any other government agency.
VA Help Center works with an approved network of mortgage lenders and does not represent every lender or mortgage product available in the marketplace. Loan programs, interest rates, lender pricing, credit requirements, underwriting overlays, appraisal and valuation requirements, property requirements, loan-to-value limits, documentation requirements, and other terms vary by lender and transaction.
A lender overlay refers to an additional lending requirement beyond the underlying program requirement. All VA-guaranteed loans must still satisfy applicable VA requirements. Selecting another lender cannot eliminate an actual VA, federal, state, or other applicable legal requirement.
Access to multiple lenders does not guarantee loan approval or that a particular loan, rate, payment, lender, or cost will be available. Transactions remain subject to lender underwriting, borrower qualification, property eligibility, VA requirements, and applicable law.
Mortgage broker and loan-originator compensation is subject to applicable federal and state requirements. Compensation structure, lender credits, borrower-paid charges, interest rates, and other loan terms should be reviewed on the applicable Loan Estimate and other required disclosures.
Moving a transaction from one lender to another can require new disclosures, lender-specific documentation, underwriting, and processing and may affect the closing timeline. Availability of an alternative lender is not guaranteed.