Traditionally, homebuyers would rely on their banking institutions to provide them with anything related to their mortgage.
These days, you have a lot more options at your disposal, and you can choose what suits your needs best. But with the rise of mortgage brokers and bankers comes more confusion and decision fatigue.
Who should you choose? Who will meet your needs? What is the difference between the two? Trying to select the right lender on your own can become difficult, especially because it is such an important decision.
It’s even more important to weigh your mortgage options and determine your budget for your first home.
Sometimes applying to certain lenders involve lots of stress tests and mortgage rules that result in a drawn-out process that doesn’t even guarantee a loan by the end of it.
It can be frustrating. This is why it is important to choose a qualified and experienced mortgage broker or banker to fit your needs and secure the best rate, terms, and mortgage options that will impact your home buying choice.
Here is what you need to know about mortgage bankers and mortgage brokers.
What is the Difference Between a Mortgage Banker and a Broker?
Both a mortgage banker and mortgage broker help you with securing a home loan. As the name implies, mortgage bankers work for banks or lending institutions and can only offer their own products. The loan comes from their institution, and the banker is a direct lender.
Mortgage brokers, on the other hand, do not just represent one single institution. Rather, they work with many institutions to look or shop for a loan for an individual. They have licensed professionals with access to multiple lenders and mortgage rates. The broker acts as the middleman between you and the lender.
What is the Difference Between Getting a Mortgage from a Banker and Getting One from a Mortgage Broker?
A mortgage is a mortgage, no matter who is providing the loan to you. While that may be true, whoever you decide to work with can save you hundreds and thousands of dollars long term.
Bankers have a set of rules and policies they must follow, offering you pre-packaged mortgages and rates that they think will be the most beneficial for you. The products they offer you all depends on your financial situation and the financial institution you do your banking with.
They will ask you about your employer, monthly salary, and duration of employment, and once they have that information, they will enter it into a system. The bank will work with realtors and loan applicants to complete the mortgage process.
Not only will they gather personal information from you, but they will also need to evaluate the property and put all of those pieces together. The mortgage banker will then advise you of the loan options within their institution. If you are self-employed, you may need to go through a long process before you can get a mortgage banker to lend to you.
Mortgage brokers will also work with realtors and/or borrowers to figure out the needs of the buyer and shop for a solution that is tailored to you. They are not tied to any single institution or lender and are free to work with whoever they see fit, and whoever they find that will fit your unique needs.
They will work on your behalf with lenders to secure the best rate for your ideal situation. They also benefit from something called volume discounts. Because of the nature of their job, they acquire a high volume of mortgage products that grant them special discounts they can pass on to you. Meanwhile, banks may not be accessible to these kinds of deals.
Comparing Banks and Mortgage Brokers
Many people wonder why they wouldn’t get a better deal with their bank on a mortgage, but it depends on your banking situation and the financial institution you bank with.
They can only do so much because everything is based on predetermined information and policies. Although they can offer you some deals or discounts if you consolidate your services with them. Of course, the value of this will vary from person to person.
With a mortgage broker, because of the big scope of lenders and mortgage products they deal with, they have lots of access and knowledge to the mortgage market as a whole. They can give you suggestions tailored to your needs once they get to know your individual circumstance.
If you have bad credit, are self-employed, or have any other barriers when it comes to accessing a mortgage, brokers can be the solution you are looking for. In addition to negotiating terms with lenders, brokers can find lenders who specialize in servicing clients that have adverse credit, etc. Some mortgage brokers will not get paid until they close the mortgage deal, so you have minimal risks if things do not work out.
When it comes to mortgage loan options, you should pay lots of attention to the little details and never sign an agreement that you do not fully understand. As with anything, there may be hidden fees and charges to watch out for. Always read through contracts and other documents before signing.
Other financial institutions like trust companies and credit unions service mortgages, and are good alternatives to banks. It is possible to access these rates by yourself or through a mortgage broker.
According to surveys, more and more potential home buyers are taking things into their own hands by doing their own research. Individuals are starting to shop around by contacting lenders and mortgage brokers for quotes, information, and advice.
This shows homebuyers’ willingness to compare rates, which used to primarily be the job of the mortgage broker.
If you are not well-versed in mortgage terms or policies, it is best to get help from a licensed professional to navigate the field on your behalf.