With record low-interest rates available right now, have you decided now is the time to take the leap and get into a new home? It seems you’re not alone. The U.S. Census Bureau reports as many as 676,000 new homes were sold in their latest collection home sales data.
So, while you might be able to get great rates, there’s lots of competition to find the perfect house for you. Finding that house can feel daunting and never-ending.
And what the financing once you find the perfect house? There’s the mortgage broker vs bank debate when it comes time to get a mortgage. How do you know which option is a better choice for you?
This should be an exciting time, buying a house. Don’t let the financing part get in the way of your excitement. Read on to learn all about the differences between working with a conventional bank or working with a mortgage broker.
How Banks Work With Mortgages
Let’s say you’re ready to buy and want to get pre-approved. You have your checking and saving account at the local branch of your bank, so you decide to start there.
You head into the bank where you will meet with a loan officer from the bank. This loan officer is essentially the bank’s sales force when it comes to home loans.
They will help you with the application and guide you through the process if you get the loan from them.
Certainly, it might be convenient to decide to get your loan from the same place you do your other banking. Yet, the big question is what option do they have for you when it comes to writing a mortgage for you.
Let’s take a closer look at what the traditional bank can do.
Positives to Work With the Bank for Your Mortgage
You might already have a relationship with this bank which can be positive. As mentioned, it might be convenient to add this loan to the rest of the banking you do here. And convenience matters.
The bank might also be able to provide a variety of loans from a conventional loan to a jumbo loan. Although, you want to be sure if your bank will offer an FHA option if this is how you hope to get into a house.
Often banks will have competitive interest rates.
Things to Consider With a Bank Loan
While it might be true that they often have competitive mortgage rates, you would need to leave that bank and go to multiple banks to be able to compare loan packages or mortgage options.
Banks have limited options when it comes to mortgage loans. They are often more particular about who they lend to.
When you’re shopping for home loans, one thing you want to know is how your lender is getting paid. Banks will not disclose how they make money on the loans they give beyond interest. This makes comparison shopping tricky.
The thing to remember here is that your loan officer works for the bank. He represents the bank’s interest in your loan. That can be positive or negative too.
How Working With a Mortgage Broker Works
A mortgage broker works as an independent agent. They don’t represent just one financial institution. Instead, they work with many financial institutions.
When you go to a mortgage broker, they will consider you as a borrower.
- How much do you want to borrow?
- How much do you have for a down payment?
- What’s your credit like?
- What other factors might impact you getting a mortgage?
Then the mortgage broker’s role is to look at the wholesale lenders they work with and to find you the best mortgage available.
Positives to Work With a Mortgage Broker for Your Mortgage
One of the biggest positives in working with a mortgage broker is the options you have. While a bank has a limited menu of mortgage products, a mortgage broker will have many options.
They can work to find the best loan for you. If you want to do a loan with a smaller down payment, they can find a lender to accommodate you. Maybe you have less than perfect credit and the bank wouldn’t finance you.
Because the mortgage broker works with many lenders, there are more options available.
The mortgage broker also sets their profit margins and can be easier to negotiate with. They also need to tell you who is paying them and how much, so the fees and costs are typically more transparent than with a bank.
Things to Consider With a Mortgage Broker
One thing to consider is that when you work with a broker, you have more parties involved. So instead of you and the bank, you now have you, the mortgage broker and the lender.
The more involved parties can mean it can take longer. The broker also might have less control when it comes to moving a loan along. This might be something to consider in the busy housing market if you are on a tight timeline.
Often mortgage brokers arrange more complicated loans which can be more costly. But often these are the loans banks won’t do.
If you have a relatively uncomplicated loan, the costs should be competitive with traditional banks though.
When you are buying a house, paying attention to interest rates is huge. Even the smallest difference in rates can cost you or save thousands and thousands over the course of a loan’s life.
While the home buying process can be overwhelming, this one area that’s an advantage for mortgage brokers.
They can do the rate shopping for you. It’s their role to find a competitive mortgage that best meets your borrowing profile.
Choosing Mortgage Broker Vs Bank
When considering mortgage broker vs bank, in the end, you want the best loan you can get for your home purchase. Often this means going working with the person who has the most options available.
If you are in the market for a new house, we can help you find a great mortgage package. Contact us today to get started with a consultation, so we can help you get into your new home.