Mortgage brokers work with a variety of lenders, giving them access to many products at many prices. That means you can go to a mortgage broker and compare several loan programs. The broker will help you understand the interest rate, closing costs, and other details of each offer to find the best loan. You present the pros and cons of using a broker or bank, with no bias toward either option.
Banks have the advantage of having more control over the process, where brokers have the ability to look for more avenues for a particular loan. I have seen very intelligent and competent mortgage professionals in both the banking and brokerage sectors. I think brokers are going to resurface, as most large institutions are wary of offering non-QM loans. A lender is a financial institution that provides loans directly to you.
A broker doesn't lend money. A broker can work with many lenders. So which one do you choose? A full-service bank ensures that your loan stays with the same company for the entire term. Make sure the bank is servicing your own loans.
On the other hand, a mortgage company can offer quick closures, product availability, and loan originator expertise. However, the individual is often the most important aspect of home loans. Both types of companies have fantastic and knowledgeable loan originators. That means you won't have control over who you ultimately pay or work with, although your mortgage rates and terms can't change after the sale.
Mortgage lenders generally offer a wider variety of loan options and may be more lenient towards borrowers with damaged credit. Today, there's also the option of turning to a non-bank lender that doesn't have physical branches or offer deposit accounts, which can result in lower mortgage rates and charges compared to banks and brokers. They offer mortgage loans along with other banking products, such as checking and savings accounts and business and business loans. Obtaining a mortgage through a mortgage broker may be easier in the sense that you have someone to help you compare rates and handle the mortgage application process.
While a mortgage broker is a one-stop shop for multiple options, their fees come from the lender, so it's possible for well-qualified buyers to get better rates and fees by eliminating the middleman. In fact, FICO has adjusted its algorithm for this purpose and ignores mortgage inquiries made 30 days prior to qualification. Most mortgages are sold by designated mortgage lenders and banks, but there are other options that are sometimes hybrids between the two. This could include offering savings or checking accounts, credit cards, or other specific products in exchange for more favorable mortgage terms.
So for someone who might need a helping hand, or who just wants more attention, maybe a first-time homebuyer, a mortgage broker might be the best option. Mortgage brokers are an important part of the mortgage business and account for more than 10 percent of all mortgage loans, more or less. You are not required to use them, although they can be useful for quickly completing the mortgage pre-approval process.
