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Using a Mortgage Broker vs. a Bank – the Legal Point

— February 14, 2022

With the guidance of a mortgage broker or a bank loan officer, you may effectively navigate the home loan application process.

Whenever you need to buy a house, you look for services to help you find the best mortgage loans that will meet your demands. Two of the most common choices in home financing are mortgage brokers and banks. 

You know that the application process may be tough and time-consuming and want to work with someone who is reliable and cares for your success. You’ll have to fill out a loan application, secure funds, understand your loan offers, go through escrow, etc. So, you need someone who can guide you in all the home buying process. Both brokers and banks are good choices for finding a mortgage loan and they have different advantages. Let’s dive into each one of them to understand how they differ and what benefits they have. 

Mortgage brokers vs. Banks

Let’s see the differences between mortgage brokers and banks. 

Banks: When you get a mortgage, the bank is immediately giving you the money to buy a house. When you shop for a house loan with a bank, you’re doing your research to see if that bank is the appropriate fit for you. As a result, you’re likely to create a list to keep a record of fees, rates, and other factors.

Mortgage Brokers: A mortgage broker acts as a middleman between you and direct lenders like banks and a lender pays them a referral fee. They discuss your requirements and needs with you and then do the rest of the work. They do their best to get a lower interest rate. The broker then works with you to identify which loan is best for your circumstances and continues to assist you throughout the transaction. 

The majority of mortgage brokers have access to different lenders, such as banks, private mortgage companies, and credit unions, providing you with more options. Down payments, origination fees, interest rates, points, and other factors all play a role in mortgages. A good broker can assist you in understanding how these variables work and how one loan is a better deal than another. Keep in mind that a good mortgage broker will provide you with a variety of lending options as well as helpful information. With that in mind, read reviews, research, and ask your friends to get recommendations for finding an honest mortgage broker. Learn about your broker’s compensation and any fees you may have to pay for their services.

Benefits of a Mortgage Broker

Two-story house at dusk with lights on; image by Manish Dogra, via
Two-story house at dusk with lights on; image by Manish Dogra, via

Now we need to understand what are the benefits of mortgage brokers. 

  • Can guide you from the beginning – During the homebuying process, you can work with a mortgage broker early on. They can answer questions regarding how to receive a mortgage and help collect all the essential documents that are needed for a mortgage.  
  • Provides access to multiple loans – A mortgage broker can help you find a variety of mortgage loans from a variety of providers. The more experience and network a broker has, the higher your chances of getting the loan and interest rates that best meet your needs.
  • Saves time and does the legwork – Obtaining a mortgage is a time-consuming process. Even when you’ve done your research to select the best bank for you, the application and loan closing process may be time-taking, with a lot of back-and-forth and demands for documentation. A qualified mortgage broker will save you time by handling the paperwork and dealing with the lenders on your behalf.
  • Researches the best deal – Instead of representing the interests of a lending institution, a mortgage broker represents yours. A broker can provide you with the best repayment amounts, interest rates, and loan products because they have access to a large selection of mortgage products. Mortgage brokers will interview with you to determine your demands as well as your short and long-term objectives. 

When to choose a mortgage broker: A mortgage broker may be beneficial for you if you are having problems qualifying for a mortgage, are self-employed, don’t have a high credit score, or place a high emphasis on convenience.

Benefits of Banks

Now it’s time to dive into the advantages of banks:

  • You work with a bank employee – You’re dealing with a bank employee when you work with a loan officer at a bank. They should be able to quickly resolve any issues. When you work with a mortgage broker, on the other hand, keep in mind that because they don’t work for the bank, they might not always be able to influence what happens there.
  • Allows discounts – When it comes to buying a home, it seems easier to work with your current bank, but it’s recommended to search for the best mortgage rates. You need to consider your existing bank in your searches, because it may provide discounts to loyal customers who also use other services of the bank, including checking, credit cards, etc. 
  • You have established connection – A customer’s relationship with a bank and its employees may already be established. As the bank may already be aware of a client’s credit card histories, account balances, investments, and other financial information, it may be able to speed up the approval process. It can give you peace of mind knowing that the organization is big and stable enough to weather financial storms. Federal underwriting rules must be followed by all banks.

When to choose a bank: Working directly with a bank may make more sense if you’re experienced in crunching numbers and want more control and fewer costs over the home-buying process.

With the guidance of a mortgage broker or a bank loan officer, you may effectively navigate the home loan application process. Whether it’s a mortgage broker or a bank loan officer, the choice is yours!

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