We get this question a lot from our first time buyers — are banks and mortgage brokers the same? The quick answer is no and here’s the definition and difference between the two.
A bank offers you a home loan. They usually have a set rate and strict rules for approving mortgages.
On the other hand, a mortgage broker arranges mortgage financing between a borrower and a lender. They act as a middleman. They are not the ones you borrow money from, but they negotiate with various lenders or banks to provide you with the best rate for a home loan you can qualify for.
That said, which is better when buying a home — working with a bank or a mortgage broker?
Pros of Direct Lender (Bank)
- Having a good relationship with a bank gives you the benefit of familiarity and may make you eligible for special perks.
- Offers the convenience to have all dealings with one financial institution.
- Cuts out the middleman and may speed up the process.
- Some find working with a major bank safer.
- Less documentation, banks already know you.
Cons of Direct Lender (Bank)
- Only have in-house mortgage products and offers.
- Higher rates.
- Fixed rates make it hard or impossible to negotiate at all.
- Stricter requirements especially if you have a poor credit history.
- Have fixed office hours and you’ll work with various officers from time to time.
Pros of Mortgage Broker
- Free financial advice throughout the process.
- Easier communication with one representative through email or call.
- Saves you time and effort with access to many lenders.
- Helps you find the best rate possible to save you money.
Cons of Mortgage Broker
- They may not have all the information at their fingertips and may need to contact the lender to ask questions.
- May require more documentation to support your application with a new lender.
It’s vital to find the right loan with the most favorable terms possible for you since it’s a long-term commitment. Here’s what you need to get your mortgage approved.
If you or anyone you know is interested in being qualified to purchase a home right now, please feel free to contact the agents at Broadpoint Properties.