The two key players in a mortgage transaction are the borrower and the lender.
The borrower is the individual or family who is taking out the loan to purchase a home. The lender is the financial institution that is providing the loan.
A lesser known but often equally important player is the mortgage broker.
A mortgage broker is a professional who works with both the borrower and the lender to secure financing for the home purchase.
In this article, we will study the target market for mortgage brokers and understand what type of customer is most likely to use their services.
We will also focus on the differences between the mortgage broker and the banker and study the qualities that both the borrower and the lender look for in a mortgage broker.
Read on!
What is a Mortage Broker?
A Mortage Broker is a professional who helps secure financing for the purchase of a home by acting as an intermediary between the borrower and the lender.
A mortgage broker can help borrowers get lower interest rates on their home loans and can also help find a lender who is willing to work with the borrower.
Additionally, a mortgage broker can help the borrower to understand the terms of their loan and can provide guidance throughout the process.
Some mortgage brokers also offer other services such as home insurance, title insurance, and home inspections.
Finally, mortgage brokers are regulated by the government and must be licensed in order to operate.
How is a Mortgage Broker different than a Banker?
The key difference between a mortgage broker and a banker is that a mortgage broker works with multiple lenders, while a banker works for one specific lender – often their own bank.
Mortgage brokers are typically paid by the lender, while bankers’ fees are often covered by the borrower.
Another difference is that mortgage brokers have (or should have!) more knowledge about the different types of loans available and can offer more options to the borrower, while bankers can only offer loans from their own institution or partner institutions
Finally, mortgage brokers can be a more trusted advisor to the borrower throughout the loan process, as they are not beholden to any one lender.
Who is the Target Market for Mortgage Brokers?
To best understand the target market for mortgage brokers we need to ask ourselves – who needs mortgage brokers?
Why would someone, a lender or a borrower, go through a mortgage broker instead of transacting directly with the other party?
Answering this question gives us the following segments of the target market for mortgage brokers:
- Borrowers who need help processing a loan
- Borrowers who cannot find a loan on their own
- Borrowers who want to get the best terms on their loan (and are willing to pay for it
- Businesses who need mortgage loans but lack in-house resources to manage the process
- Lenders who need help finding and qualifying borrowers
- Banks who want to outsource loan processing
To truly understand the target market for mortgage brokers, let’s take a closer look at each segment.
#1. Borrowers who need help processing a loan
Sometimes, people need help with the loan process and that’s where a mortgage broker can come in.
For example, if someone is not sure what type of loan they need or how to apply for a loan, a mortgage broker can provide guidance and support.
Sometimes, they may need help with the fine print or with understanding the terms of the loan. A mortgage broker can provide clarity and ensure that the borrower is getting the best deal possible.
People who need help processing a loan are typically first-time home buyers, people with bad credit, or people who are self-employed. They can be an ideal target market for mortgage brokers.
Mortgage brokers can help these people by guiding them through the loan process, assisting with the loan application, and finding a lender who is willing to work with them.
#2. Borrowers who cannot find a loan on their own
For borrowers with bad credit or other financial difficulties, a mortgage broker can be the only way to get a loan.
Likewise, people who have been denied a loan by their bank may be able to get approved through a mortgage broker. In this case, the mortgage broker will work with the borrower to find a lender who is willing to give them a loan.
Lenders who work with mortgage brokers are typically more willing to take on riskier borrowers because they know that the mortgage broker will only send them qualified borrowers even though they may carry above-average risk.
This makes high-risk borrowers a the target market for mortgage brokers.
#3. Borrowers who want to get the best terms on their loan
One of the benefits of working with a mortgage broker is that they have access to multiple lenders. This means that they can shop around for the best interest rate and terms for the borrower.
For people who want to get the best deal on their loan, working with a mortgage broker can be the best option.
This is because mortgage brokers could help them save money on their loan by getting them a lower interest rate, negotiating better terms, or finding a lender. And many people are willing to pay a fee for this service because they know that, in the end, it can be worth it.
#4. Businesses who need a mortgage but lack in-house resources
For businesses, especially small businesses, a mortgage broker can be a valuable resource in securing financing.
Businesses need mortgages for a variety of reasons – to purchase commercial real estate for a new factory, to expand existing office space, or to refinance existing debt.
But, not all businesses have the in-house resources to hunt for the best mortgage loan and go through the entire process of finding, negotiating, and closing the mortgage transaction.
In these cases, a mortgage broker can be hired to manage the loan process from start to finish.
#5. Lenders who need help finding and qualifying borrowers
Borrowers aren’t the only ones who can benefit from working with a mortgage broker. Lenders too are a target market for mortgage brokers. Lenders use mortgage brokers to help them find and qualify borrowers.
For example, if a lender is looking for borrowers who meet certain criteria – such as having a certain credit score or income level – a mortgage broker can help identify these potential borrowers and provide the lender with their contact information.
Mortgage brokers can also help lenders by pre-qualifying borrowers and providing them with the necessary documentation to apply for a loan.
They can save the lender time and money by only sending them loan applications from potential borrowers who are likely to be approved.
#6. Banks who want to outsource loan processing
Banks are a target market for mortgage brokers when they use them to handle some or all of the loan processing for them.
This can be beneficial for banks because it allows them to focus on other aspects of their business and leaves the loan processing to someone who is experienced in that area.
It can also be cheaper for banks to outsource loan processing to mortgage brokers because this can minimize overhead costs that come with having in-house staff handle loan processes.
What qualities make a good Mortgage Broker?
Both borrowers and lenders look for the same qualities in a mortgage broker.
Here are the top 10 qualities that make a good mortgage broker:
- Experience
- Knowledge
- Access to multiple lenders (borrowers look for this quality)
- A good pipeline of borrowers (lenders look for this)
- A proven track record of getting get the best terms
- Integrity
- Competence
- Honesty
- Attention to detail
- Competitive Fees
If you’re considering becoming a mortgage broker be sure to possess as many of these qualities as possible. And if you’re looking to work with a mortgage broker, make sure they have most (if not all) of these qualities.
Conclusion
The target market for mortgage brokers includes both lenders and borrowers. Borrowers include those who need help processing a loan, those who cannot find a loan on their own, and those who want to get the best terms on their loan and are willing to pay for it.
Lenders hire mortgage brokers to help them find and qualify borrowers. Businesses who need mortgage loans but lack in-house resources to manage the process also turn to mortgage brokers as to banks who want to outsource loan processing.
The bottom line is that a good mortgage broker can be a valuable asset for both borrowers and lenders alike. They have the experience and knowledge to get the best terms possible and can save both parties time and money.