Mortgage Broker vs. Bank: What You Need To Know Before Applying For A Loan
Posted by Lauren Schneider on Friday, May 24th, 2019 at 8:11am.
So you've found your dream home and you want to start the mortgage process to make things official. There are two options for buyers when it comes time to secure their local mortgage lender: either go with a mortgage broker or get a loan from a bank. Many homeowners will tell you exactly what they think the right choice is and while their opinions may be valid, they are often biased by their own past experiences. To find out which option is best for your personal needs, continue reading as we look at what it's like to work with a mortgage broker versus bank:
What is a Mortgage Lender?
A mortgage lender refers to a bank or other financial institution that specializes in mortgage products. Banks employ loan officers who work off a combination of salary, commissions, and bonuses. They work with homeowners to recommend mortgage products that will work with your unique lifestyle. When you sit with a loan officer at a bank, they will ask numerous questions in order to determine the best mortgage rate possible. However, it's important to remember that the loan officer works for the bank, so they will never recommend shopping around for mortgage rates and the offers they present, will always benefit the bank as well.
What Does a Mortgage Broker Do?
Mortgage brokers are free agents that are not associated with a specific financial institution. In a similar way that real estate agents work for prospective buyers or current homeowners, a mortgage broker works for the buyer in securing the best possible mortgage rate available. Brokers approach numerous lenders on your behalf, looking for the best deal. In return, brokers accept commission from the bank for securing a good loan.
What are the Pros and Cons?
Depending on your unique needs and situation, you may choose to go with a broker or a bank officer for different reasons. For example, many people love the fact that a mortgage broker often has flexible hours, can negotiate on your behalf, and have access to non-traditional lenders. However, it should also be noted that in some very rare cases, brokers are not available to face-to-face meetings and there is always the danger that they will simply try to secure a risky loan to cash out on the commission. When choosing a mortgage broker, look for someone that belongs to a reputable company or is very highly recommended by people you know and online reviews.
Get Quotes From Both Parties Before Making a Commitment
You can contact different loan professionals before making a commitment to either one. Start by calling around and asking questions of the different lenders in your area.
When you find two professionals (one broker and one banker) that you like, go through the pre-qualification process for each. Pre-qualification takes about 15 minutes over the phone and requires no commitment from you. After getting a pre-qualified letter from each professional, you can decide which lender is right for you.
Once you've picked a professional, the next step is to get pre-approved. This is a more extensive process and requires you to submit a variety of private documents, like tax documents. Generally speaking, it's better to pick your lender before getting pre-approved.
Working with a bank also has its ups and downs. For instance, a bank loan inspires confidence with a brick and mortar location in your neighborhood and offers buyers the ability to bundle other banking services with their mortgage. Although on the negative of things, bank loans are often less flexible with a higher interest rate than what you would find with a broker.
For more information on using a mortgage broker versus a traditional bank loan for the purchase of your next home, contact the MilitaryHomeSearch.com team today at 719-373-1906.