September 7th, 2018 10:09 AM by Jackie A. Graves, President
When it comes to getting
approval for a home mortgage loan, borrowers can either work with a mortgage
broker or a bank. Either option will take you one step closer to becoming a
homeowner, but they involve very different processes and result in different mortgage
As you get started, it's helpful to remember that whichever option
you ultimately decide upon, both types of provider are competing for your
business. Here are four major things to consider before you decide to work with
a mortgage broker or a bank:
Customer Service - Getting approved for a
mortgage can be a stressful process, and almost impossible to navigate alone.
It's imperative that you partner with someone who can provide top-notch
customer service, and draw on their experience in the mortgage industry to
fully explain all of your options.
Generally, a mortgage broker has only one job, and that's to make
sure you get approved for a mortgage loan. Most brokers will do whatever it
takes—even if it means working around the clock—to help you achieve that goal.
Also, since brokers are mortgage industry specialists with a dedicated mission,
they generally won't attempt to upsell you things you don't want or need.
Many borrowers go to their bank when shopping for a loan because
of a pre-existing relationship they have. Talking to and working with someone
you know and trust, and who already knows your financial history, is both
comforting and valuable during such a major life event. The quality of customer
service you receive may vary based on the size of your bank. Smaller banks tend
to provide more personalized customer service, but may lack specialized
mortgage expertise, while the reverse can be true of larger banks.
Experience and Expertise - To
reiterate, it's essential that you work with someone who knows the mortgage
industry inside and out. Buying a home and determining how you'll be able to
afford it can be an overwhelming process, but if you have someone with years of
experience and expertise on your side, it becomes much more manageable.
All brokers must go through an extensive licensing process. Each
brokerage's loan officers undergo an even more thorough evaluation process,
which includes background checks and credit checks, and taking additional
educational courses. The purpose of this is to protect borrowers.
Loan officers working at banks are required to be registered, but
not licensed. This means they are required to register with the Nationwide
Mortgage Lender System (NMLS) to receive a unique identifier number, and submit
fingerprints for a state and federal background check and their personal
history and experience. Although it is less stringent than the licensing
process, registration still provides evidence of a bank loan officer's
skill—and some banks also require their loan officers be licensed.
Cost - There's
a major difference in cost between working with a mortgage broker and working
with a bank. Since mortgage brokers typically have low overhead, they're less
likely to charge additional fees; in fact, brokers are often compensated with
commission via an agreement with lenders, so they might not charge you for
Banks reward loyalty. If you have multiple accounts open with a
particular bank, your banker might offer you discounts, such as on closing
costs, to incentivize you to work with them. Also, since working directly with
a bank eliminates the middleman, you'll probably pay fewer closing cost fees
than you would with a broker.
Interest Rate Options - As
a borrower, your goal should be to obtain not only mortgage loan approval, but
a low interest rate, as well—and what type of interest rate you receive can
depend on whether you work with a mortgage broker or a bank.
Mortgage brokers generally have access to a wide variety of mortgage
products, with diverse terms and approval requirements. Since brokers aren't
beholden to a lender, they're able to look for a mortgage with terms that are
most favorable to the borrower. Should something go wrong—say, for example, you
are denied for a loan—your broker can continue to work with you to find one
that best suits your financial needs.
Familiarity can be a major differentiator when it comes to
securing low interest rates. Banks are already familiar with a client's
financial history, including the balance in each borrower's checking and
savings account, which makes qualifying easier and could help you get a lower
rate. Also, the longer your relationship with your bank, the more likely you
are to receive more favorable interest rates.
There are pros and cons to working with either a mortgage broker
or a bank. Your bank might be able to get you a better deal, but a broker might
be the better option if you want someone to help you comparison-shop for the
most favorable terms as they guide you through the loan process. Which one you
choose depends entirely upon your specific situation. Be sure to do your
homework before you make a decision by asking for references.
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