What’s the Difference Between a Bank Mortgage or a Mortgage Broker?

 In Blog, Real Estate Questions

If you’ve been doing some online research for your new mortgage, you’ve likely run across both banks mortgages and mortgage brokers. Most people don’t understand the difference between the two, though there are some major ones to consider.

 

We’re here to give you all of the pros and cons of bank mortgages and mortgage brokers so that you can ultimately decide which one is right for you!

 

 

Mortgage Broker

Mortgage brokers act as somewhat of a bridge between the lender and the homeowner. Brokers are able to perform a number of important tasks, such as producing and arranging pre-approvals, financial documents, and your loan applications.

 

A mortgage broker is meant to work hand-in-hand with banks and lenders to get you a loan. Brokers will then take a small commission off of the top as a fee for helping you to complete your application and organize your documents properly.

 

 

Bank Mortgage

When it comes to actually producing and funding your loan, that will be the bank’s job. The person who approves your loan will be part of that particular bank’s staff. They have deeper and more exclusive connections with certain loan programs and they can also help to save you a few bucks thanks to the fact that there are no extra fees packed on top.

 

 

 

 

Which One Is Better?

There are a few different factors to keep in mind when deciding between the two. For many, mortgage brokers seem like the best choice, as they have access to a wide variety of banks and lenders, allowing you to pick the best or cheapest option. The thing is, you have to play this game carefully.

 

Because mortgage brokers are paid commission by the lender or mortgage company (likely a bank), many will choose the bank that pays them the largest commission over others. This can cloud the even playing field.

 

If a broker has the option between choosing a lender with great deals and small commissions or a lender with expensive deals and high commissions, well, you get the picture.

 

In a way, you might be better off shopping around different banks, as they only have access to their own list of programs with specific rates.

 

 

How To Choose

To choose the best option, you should shop around to both lenders and brokers. You may find a great deal through a broker considering the wide variety of lender options that they provide you with. If you need to be particular with your loan choice, brokers can also help you to find pieces of the puzzle that work for you and your financial situation, such as term length, mortgage types, interest rates, etc.

 

On the other hand, working with a lender directly will help you to avoid broker fees and conflict of interest. You can also have facetime with your lender and get all of the information about your loan firsthand.

 

 

Conclusion

Do yourself a favor and consider both options equally. These types of situations are never black and white. Sometimes you just have to go with your gut to see who you trust to give you the best deal.

 

Do you have experience with using a mortgage broker or bank lender? Let us know in the comments!

Recommended Posts

Leave a Comment

Differences between mortgage delinquency and mortgage default