So you need a mortgage? But who should you work with, a bank or a mortgage broker? There are pros and cons to each and we will break down the options to help you navigate this decision with ease.
Broker vs. Bank
When you are looking to buy a home you will most likely need a mortgage to help you fund the purchase. When obtaining a loan you will want to explore your options of borrowing the funds through a bank or through an independent mortgage broker. These lenders can also be broken up into two categories:
Direct Lenders – This type of lender includes both banks and mortgage lending institutions. Direct lenders originate, process and fund the loan themselves. This category will include national banks, credit unions and mortgage companies that focus on home loans. The category of bank will include both national banks as well as small local banks. This type of bank does mortgages but also handles car and personal loans as well as checking and savings accounts and investments CDs. Banks have a variety of services they provide in the financial realm.
A direct lender in the mortgage banking category is an organization that only focuses on mortgage lending. This would include national mortgage companies who do not do any other type of lending or financial services other than mortgages and refinances.
Mortgage Brokers – A mortgage broker partners with multiple whole sale lenders including banks to be able to provide a variety of loan options to their clients. It is their job to review your scenario and then source the best loan product for your specific lending needs.
A mortgage broker has partner relationships with a variety of wholesale lenders. This will include local banks in their area as well as national lenders who only focus on mortgages. The unique design of this scenario is that the broker can offer you loan programs to best meet your exact needs and circumstances while also providing personalized customer service though the entire process.
Pros and Cons of Banks vs. Brokers?
In the past there have been blanket stereotypes regarding obtaining a loan from a bank vs a mortgage broker. Traditionally it has been suggested that borrowers with a strong financial history, credit score and income are best suited at a bank. Where those with unique employment situations and lower credit scores might be better served at a mortgage broker. Today it is not safe to make assumptions about a bank vs. broker lending experience but here are some clear pros and cons of each.
- A local bank offers a brick a mortar location and local service.
- You can try to negotiate some of the fees because every fee comes from the bank directly.
- Banks and direct lenders are not required to disclose the premium they’re receiving or wrapping into the interest rate on your loan. This makes it imperative that you ask for this information and negotiate.
- A conservative bank may deny your loan even if you’re qualified based on their lending capacity.
- They can only offer you their own internal loan programs.
- Although a bank is federally licensed to do mortgages the individual loan officer you work with is not required to be federally licensed.
Mortgage Broker Pros:
- A mortgage broker has a variety of loan programs available to them. This allows higher qualified buyers to pay less fees and have lower rates with a broker and those with more complex lending scenarios have more options available to them.
- Any fee you are charged by a mortgage broker is clearly outlined. Unlike a bank or direct lender, there are no hidden fees.
- Quality Mortgage brokers understand that questions come up outside of traditional banking hours and they make themselves available to their clients.
- A loan officer at a mortgage broker is individually licensed in each state they do loans in and they are required to do continuing education each year to maintain their expertise in the industry.
Mortgage Broker Cons:
- Not all mortgage brokers are outstanding at what they do. Make sure to read online reviews on reputable website like Google and ask your realtor for recommendations.
- A mortgage broker cannot help you with other loans such as a car loan or a personal loan.
Bank vs. Broker: The Decision is Yours
If you are planning to buy a home in todays real estate market you will need to make a decision to work with a lender that you trust. It is always in your best interest to have an experienced and trustworthy lender in your corner.
The Legacy Mortgage team collectively boasts over a 120 years of industry experience and is well versed in a variety of loan programs including fixed mortgages, ARMs, VA loans, FHA, first time homebuyer and more! We have the privilege of partnering with the best local agents, appraisers and attorneys the Upper Valley has to offer. When you work with Legacy Mortgage you are working with the best local professionals from beginning to end. Reach out to the Legacy Mortgage team to get the loan process started. Call us today, 603-643-7400.