Mortgage Broker or Bank? 6 Advantages of Mortgage Brokers
It's a question home buyers have been asking themselves since the dawn of modern finance: Should I go mortgage broker or bank? Banks have their place, but there's some distinct advantages to using a mortgage broker. Mortgage brokers have access to more home financing programs than an individual bank or mortgage lender. Because brokers have access to numerous banks/lenders, they can help all kinds of borrowers with various credit score levels, and offer more down-payment options and interest rate offers.
In short, a broker gives you more options.
For example, one bank may only provide FHA financing for borrowers with a minimum credit score of 640 versus another bank that requires a minimum of 580. Using a competent mortgage broker increases your odds of qualifying for a mortgage and can expose you to many different financing options. This enables your broker to compare multiple bank loan programs and help you make the best decision for your financial needs.
Mortgage brokers’ commissions are paid by the bank after your transaction is completed. A reputable mortgage broker does not charge an application fee or deposits. Unlike large banks, a good mortgage broker typically handles no
more than 5-10 transactions per month which enables them to focus more time and effort on an individual loan transaction. A typical large bank/lender loan officer may handle 100 to 200 customers per month and are not involved with every step of your loan. This can provide a big difference in service as the bank employees’ pay is often not predicated on your loan actually closing. Mortgage brokers have a greater incentive to provide better personalized service as they are not paid by the bank unless your loan closes.
Using a local mortgage broker gives you the opportunity to meet the person originating your loan face to face. This helps build trust when making one of the most important financial decisions you will make. Most people shop for homes on the weekends and after hours. A good mortgage broker does not work Monday through Friday banker’s hours. They make themselves accessible in the evenings and weekends or whenever a client needs to meet.
Mortgage brokers deal directly with the same banks that are available to you. One big difference is that they receive wholesale rates.
Because brokers are not employees of the bank, the cost of acquisition is lower. Because the broker is securing the client and absorbing the upfront cost of originating the loan, it is
costing the bank less to acquire the loan and thus some of that savings is reflected in the lower interest rate offered through a broker. In short the bank’s origination cost is decreased. Retail banks are like big corporations, have a higher overhead and charge higher fees and rates to feed their bottom line.
Since the mortgage broker doesn’t get paid until your loan closes, they are likely able to expedite the processing of your loan to close it faster than any bank. Many times when a bank originates a loan it can move to many different employees creating both longer processing and underwriting times and interrupted communication with you. Often banks can take 30 to 60 days to close your loan while a mortgage broker can close your loan in as little as 21 days.
Mortgage brokers are required to adhere to stricter and more regulated industry standards than bank employees. For instance, a mortgage broker is required to undergo vast federal background checks and be licensed by the department of financial regulation. However, bank employees are exempt from the same strict standards. They are not required to be licensed. Unlike a mortgage broker, banks can even hire loan officers with a prior felony.
6 Reasons You Should Use a Mortgage Broker
When it comes to getting a mortgage
you have more options than you think